Decentralized Employment and the Transformation of the American City

Abstract

This paper examines the decentralization of employment using zip code data on employment by industry. Most American cities are decentralized--on average less than 16 percent of employment in metropolitan areas is within a three mile radius of the city center. In decentralized cities, the classic stylized facts of urban economics (i. e. prices fall with distance to the city center, commute time rise with distance and poverty falls with distance)no longer hold. Decentralization is most common in manufacturing and least common in services. The human capital level of an industry predicts its centralization, but the dominant factor explaining decentralization is the residential preferences of workers. Political borders also impact employment density which suggests that local government policies significantly influence the location of industry.