# **4. Empirical results**

This section presents the results obtained using different estimators, the baseline results, and the evidence on the hypotheses in Section 2.

# _4.1. Results from different estimators and baseline findings_

Table 1 shows our baseline estimations, which examine the association between urban density and the dependent variable – sales per worker – using both conventional random effects and Mundlak estimation. The results suggest that urban density is positively related to labor productivity (Table 1, Column 1). Doubling urban density is associated with an increase in sales per worker by 10% on average. The urban density effect is robust to the inclusion of firm-level control variables in our model (Table 1, Columns 2 and 3) and additional metropolitan area-related control variables (Table 1, Columns 4 and 5). Depending on the model specification, the effect of urban density is weakly significant (at the 10% level) or insignificant. Differences between the conventional random effects model and the Mundlak estimation are limited.

**Table 1: Baseline regressions on the effects of urban density**

||(1)<br>Random<br>Effects<br>Full<br>Sample|(2)<br>Random<br>Effects<br>Full<br>Sample|(3)<br>Mundlak<br>Full<br>Sample|(4)<br>Random<br>Effects<br>Common<br>Sample|(5)<br>Mundlak<br>Common<br>Sample|(6)<br>Mundlak<br>IV<br>Full<br>Sample|(6)<br>Mundlak<br>IV<br>Common<br>Sample|(7)<br>OLS-<br>2SLS<br>Common<br>Sample|
|---|---|---|---|---|---|---|---|---|
|Urban density (ln)|0.10<br>(0.06)*|0.10<br>(0.06)*|0.08<br>(0.06)|0.13<br>(0.09)|0.15<br>(0.09)*|0.14<br>(0.20)|0.45<br>(0.37)|0.17<br>(0.40)|
|Firm-level|||||||||
|Number of<br>employees(ln)||0.02<br>(0.01)***|0.02<br>(0.01)***|0.03<br>(0.01)***|0.02<br>(0.01)***|0.01<br>(0.00)***|0.02<br>(0.01)***|0.02<br>(0.01)*|
|Fixed assets (0/1)||0.16<br>(0.01)***|0.16<br>(0.01)***|0.14<br>(0.02)***|0.14<br>(0.02)***|0.16<br>(0.01)***|0.14<br>(0.01)***|0.12<br>(0.03)***|
|Firm age (ln)||0.09<br>(0.01)***|0.09<br>(0.01)***|0.09<br>(0.01)***|0.09<br>(0.01)***|0.09<br>(0.01)***|0.09<br>(0.01)***|0.09<br>(0.02)***|
|Manager<br>experience(ln)||0.06<br>(0.01)***|0.06<br>(0.01)***|0.05<br>(0.01)***|0.05<br>(0.01)***|0.06<br>(0.01)***|0.05<br>(0.01)***|0.08<br>(0.02)***|
|Sole<br>proprietorship<br>(0/1)||-0.32<br>(0.02)***|-0.31<br>(0.02)***|-0.35<br>(0.02)***|-0.34<br>(0.02)***|-0.31<br>(0.01)***|-0.34<br>(0.02)***|-0.38<br>(0.03)***|
|Foreign ownership<br>(0/1)||0.34<br>(0.02)***|0.34<br>(0.02)***|0.37<br>(0.02)**|0.37<br>(0.02)***|0.34<br>(0.02)***|0.37<br>(0.02)***|0.35<br>(0.04)***|
|State ownership<br>(0/1)||-0.29<br>(0.05)***|-0.27<br>(0.05)***|-0.40<br>(0.07)***|-0.38<br>(0.07)***|-0.27<br>(0.05)***|-0.38<br>(0.07)***|-0.49<br>(0.12)|
|Exporter (0/1)||0.23<br>(0.02)***|0.24<br>(0.02)***|0.22<br>(0.02)***|0.21<br>(0.02)***|0.24<br>(0.02)***|0.22<br>(0.02)***|0.20<br>(0.03)***|
|Part of larger firm<br>(0/1)||0.18<br>(0.02)***|0.18<br>(0.02)***|0.14<br>(0.02)***|0.15<br>(0.02)***|0.18<br>(0.02)***|0.15<br>(0.02)***|0.13<br>(0.03)***|
|Share employees<br>with higher ed.||0.40<br>(0.02)***|0.40<br>(0.02)***|0.41<br>(0.02)***|0.41<br>(0.02)***|0.40<br>(0.02)***|0.42<br>(0.02)***|0.41<br>(0.06)***|
|Training program<br>(0/1)||0.16<br>(0.01)***|0.16<br>(0.01)***|0.15<br>(0.02)***|0.15<br>(0.02)***|0.16<br>(0.01)***|0.15<br>(0.02)***|0.16<br>(0.03)***|
|Experienced crime<br>(0-4)||||-0.02<br>(0.01)**|-0.02<br>(0.01)**||-0.01<br>(0.01)**|-0.03<br>(0.01)**|

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