Sample project
Do cities nurture more efficient social networks?
It has always been a central question of regional economics why global economic output is disproportionately concentrated in cities and why people are willing to accept price premiums for housing close to the centre. In this project we investigate a main hypothesis on agglomeration forces, which may help to explain why cities enjoy a productivity advantage that drive current urbanization rates: Agglomerations are more productive and offer higher wage levels because population density makes social networks more efficient and therefore accelerates the diffusion of information and knowledge.
Anonymised mobile phone data on Switzerland allow us to make social networks visible and to test three hypotheses derived from the above argument:
- First, we show that social interactions strongly decrease with spatial distance; this finding confirms the basic assumption for the agglomeration channel described above.
- Second, our study documents that social networks are actually more efficient in cities: While population density has no influence on the average number of social contacts, cities benefit from better matching quality and less clustered interactions. Better matching quality raises the value of social interactions, and lower clustering accelerates the diffusion of information.
- Third, Figures 2a to 2c illustrate that differences in network structure are capitalised into land prices: As conjectured, access to (2a) contact-rich networks with (2b) high matching quality increases the willingness to pay for land, while (2c) a high proportion of clustered contacts lowers land prices.
Overall, the observed spatial differences in network structures can explain 25 percent of the land price gap between cities and peripheral areas in Switzerland. This new evidence for positive externalities of high population density closes a long-standing gap in the regional economic debate.