Urban amenity, human capital and employment distribution in Shanghai

Human capital theory argues that by attracting skilled workers urban amenities are increasingly important to the location decisions of firms and to employment agglomeration. However, this hypothesis has been questioned with respect to the direction of causality at the interurban level, the existence of endogeneity, and confusion between revealed and actual preferences of consumers. In this research, to contribute the existing debate over the relationship between amenities and jobs, we develop a new measurement of private service amenities based on the comments about facilities from Dianping.com, and further relate it to labor markets in Shanghai at the infra-urban level. We find that human capital theory and the distribution of amenities can partially explain the employment agglomeration in Shanghai, and their applicability is also influenced by types of amenities and sectors. Private service amenities, such as entertainment, shopping, for-profit healthcare facilities, and restaurants, are largely associated with the employment agglomeration of producer services at the subdistrict-level, which supports human capital theory, while the agglomeration of manufacturing employment is more likely associated with the development of public facilities such as transportation systems. Our study provides an innovative way to examine urban theories in the context of the social data revolution. It also suggests that the Chinese government has to encourage the decentralization of service amenities to overcome the increasing centrality of producer services and the accelerating marginality of manufacturing employment.