Title: Urban-biased structural change (with Natalie Chen, Carlo Perroni and Horng Wong)

 Abstract: Over the past few decades, high-income countries have experienced a structural shift of economic activity from manufacturing towards services. Using rich administrative micro data from France, we document three stylized facts about structural change: (i) structural change has been urban-biased -- areas with higher population density have seen a faster shift into services than less densely populated locations; (ii) the urban bias is entirely driven by exporters; (iii) large manufacturing exporters locate in small cities, while large services exporters locate in large cities. Motivated by these findings, we build and estimate an open economy model of cities and exporters to quantify the role of agglomeration forces, falling trade costs, and sectoral productivity growth in shaping urban-biased structural change. We find that changing agglomeration benefits and falling international trade costs led manufacturing exporters to grow in small cities and services exporters in large cities, generating urban-biased structural change. Sorting by exporters and non-exporters into different locations plays a key role in understanding structural change -- if exporters and non-exporters had made the same location choices, there would be no urban bias in structural change.