| We study production and its relationship to urban economics. In our first chapter, we study the measurement of production. Firms choose input levels based on characteristics that are hard to quantify; this seriously complicates the study of production. Financial markets aggregate information about firms into a single number, market value, that reflects a firm's ability to generate sales from a given set of resources. Market value can thus serve as a proxy for hard-to-observe characteristics.; In our second chapter, we test the informational efficiency of market prices of computer firms, relative to information known to firm management. Using a panel of U.S. computer industry firms, we obtain scalar summaries of managements' information from firm capital investment, and a comparable summary of the financial markets' information from firms' market value. We find that, compared to manager's valuations, the financial markets consistently under-estimate firms' marginal products.; In the third chapter, we analyze the connection between innovation and the existence of multi-industry cities. Industries that locate in the same city may facilitate each others' technological development. This externality permits the existence of economically diverse cities in equilibrium. The model implies that measures of urbanization economies must address the magnitude of technological externalities between each industry within a city. We also show that the cost of attracting new industries to a city declines substantially if the new industry has strong technological links to the existing industry. |
