Three essays on applied microeconomics

Abstract

It is well-observed in economic geography that the spatial distribution of population and firms is far from random even after netting out geographical characteristics, such as the existence of natural resources, rivers, sea-berth, or the number of hours of sunshine in a year. Within countries, we observe denser areas with numerous active local companies with higher market potential and sparsely populated locations as well. Agglomeration affects a wide range of economic phenomena that influence the daily life of economic agents: it causes higher productivity levels for firms or higher wages for workers. On the other hand, denser areas are also associated with congestion effects and increased rent and price level on the goods and real estate market. The underlying motivation of my dissertation is to understand relatively less studied or new consequences of agglomeration forces. In particular, the main goal of this thesis is to estimate the impact of agglomeration on real estate prices and empirically investigate the effect of economic density on firm growth stability and assess the impact of those firm fluctuations on aggregate growth volatility. The dissertation contributes to the Microeconomics field from an applied econometric perspective, and it is divided into three separate chapters. The dissertation makes several contributions to the field of Urban and Real Estate Economics and firm fluctuation research being the first quantifying the impact of the changing population on housing prices and calculating the relative standard distribution of idiosyncratic shocks to aggregate sales volatility using Hungarian data. Chapter 2 tests and validates a new idea, according to which economic density has an effect on firm growth stability.