Cities and Product Variety Nathan Schiff∗ May 2013† Abstract This paper measures horizontal differentiation in the restaurant industry and argues that city structure directly increases product variety by spatially aggregating demand. I discuss a model of entry thresholds in which market size is a function of both population and geographic space, suggesting that larger, and denser, markets will have greater variety in a manner consistent with the Central Place Theory of cities. I then evaluate implications of this model with a new data set of 127,000 restaurants across 726 cities. I find that the geographic concentration of the population leads to a greater number of cuisines and that the likelihood of having a specific cuisine is increasing in population and population density with the rarest cuisines found only in the densest cities. The results are consistent across multiple specifications and when instrumenting for population density. Further, there is a strong hierarchical pattern to the distribution of variety across cities in which the specific cuisines available can be predicted by the total count. These findings parallel empirical results from Central Place Theory work on industrial composition and provide evidence that demand aggregation has a significant impact on consumer product variety. 1 Introduction Easy access to an impressive variety of goods may be one of the most attractive features of urban living. Economists have long argued that consumers have a love of variety (e.g. Dixit and Stiglitz 1977) and more recent work in urban economics suggests that consumption amenities, especially local or nontradable goods, are a significant force driving people to live in cities (Glaeser, Kolko, and Saiz 2001, Chen and Rosenthal 2008, Lee 2010). The amount of product variety in a market may also provide insight into the intensity of competition as firms in differentiated markets may face less direct price competition (Mazzeo 2002). Despite the potential importance, we have little evidence on consumer product variety in cities and therefore cannot explain why some cities seem to have more variety than others. Cities vary widely in the characteristics of their residents, government, and culture and it could be that these idiosyncratic features explain all differences in consumer product variety. On the other hand, the Central Place Theory of cities suggests a hierarchical pattern in the number of goods available in different size markets with larger markets having all of the goods of smaller markets as well as additional higher order goods (Christaller ∗ Assistant Professor, Sauder School of Business, University of British Columbia [email protected] Kristian Behrens, James Campbell, Tianran Dai, Tom Davidoff, Andrew Foster, Martin Goetz, Juan Carlos Gozzi, Vernon Henderson, Toru Kitagawa, Brian Knight, Sanghoon Lee, Mariano Tappata, Norov Tumennasan, seminar participants at Brown University, the Center for Economic Studies at the Census Bureau, the Sauder School at UBC, the Federal Reserve Bank of Philadelphia, Tsinghua University, City University of Hong Kong, Shanghai University of Finance and Economics, and participants at the CUERE, IIOC, and UEA conferences for helpful comments. † I thank Nathaniel Baum-Snow, 1 and Baskin 1966, Lösch 1967). While this theory has not been applied to consumer product variety, recent empirical work has shown that industrial composition varies systematically with population size (Mori, Nishikimi, and Smith 2008, Hsu 2012, Mori and Smith 2011). In this paper I will show that a key feature of the Central Place Theory of cities, demand aggregation, suggests that even if all cities were identical in their characteristics, differences in population size and land area could lead to significant differences in consumer product variety. I will argue that cities aggregate demand on two margins–population size (scale) and land area (transportation cost)–and thus by concentrating groups of consumers with the same preferences in a small geographic space, large, dense cities provide the necessary demand for a firm catering to that taste. I then measure product variety across a large set of cities for an important non-tradable consumption amenity—restaurants—and examine how demand aggregation affects variety across locations. Using a unique data set of over 127,000 restaurants across 726 US cities I find that for large cities, population size, land area, and the geographic clustering of specific populations have a substantial effect on the amount of product variety in a city. For the 182 cities in the top quartile by land area of my data (mean population 331,000), a one standard deviation increase in log population is associated with a 57% increase in the count of unique cuisines. A one standard deviation decrease in log land area–which can be thought of as an increase in population density holding constant population size–is associated with a 10% increase in cuisine count, equivalent to increasing the percentage of the population with a college degree by one standard deviation and larger than the effect of increasing the ethnic population associated with each cuisine by one standard deviation. For the smallest cities in land area I find that population alone is the most important factor and estimate that a one standard deviation increase in log population is associated with a 145% increase in cuisine count but that changing land area to increase density would have little effect. The way in which variety increases with population and land area is consistent with a simple model of demand aggregation and many of the characteristics of the distribution of cuisines across cities parallel findings from the empirical work on Central Place Theory. Bigger, denser cities have more cuisines but the distribution of restaurants across cuisines, or evenness, declines with city size. The specific cuisines found in each city follow a hierarchical structure in which cities with relatively rare cuisines often have all of the more common cuisines and cities with few cuisines tend to have only common cuisines. Rare cuisines are only found in cities with many restaurants while common cuisines can be found in cities with few restaurants. These findings cannot be explained by the empirical distribution of restaurants across cuisines (“balls and bins” models) and suggest that the demand aggregation mechanism of Central Place Theory can have a significant effect on a city’s consumer product variety. 1.1 Consumer Cities and Non-tradable Product Variety In their “Consumer City” paper, Glaeser, Kolko and Saiz (2001) write that there are “four particularly critical amenities” leading to the attractiveness of cities and that “first, and most obviously, is the presence of a rich variety of services and consumer goods.” Noting that most manufactured goods can be ordered and are thus available in all locations, they write that it is the local non-tradable goods that define the consumer goods of a city1 . I will continue with this notion of local non-tradable consumer goods and suggest that it is especially for products characterized by significant consumer transportation costs, heterogeneous tastes, and a fixed cost of production, that the ability of cities to agglomerate people with niche tastes will lead to greater variety. Examples of this type of product would include bars, concert halls, hair salons, movie theaters, museums, restaurants and any other location-based service or good that is differentiated and patronized by consumers with a specific set of preferences. This idea would also hold for retailers that aggregate specific 1 Handbury and Weinstein (2012) show that residents of cities also have greater access to tradable varieties and use a varietyadjusted price index to calculate the welfare effects of this greater access. 2 collections of tradable goods and where visiting the store itself provides some benefit to the consumer, such as specialty bookstores, niche toy stores, or clothing boutiques. Theoretical models of product differentiation almost always specify that each firm produces a unique product, such as in Dixit-Stiglitz models with CES utility, circular city models, or discrete choice models (Dixit and Stiglitz 1977, Salop 1979, Anderson, de Palma, and Thisse 1992). Additionally, product varieties are often assumed to be symmetric in that every variety is valued equally by the consumer, making only the count of varieties important and not the actual labels or identities of the products2 . While this view of variety has been quite useful in tackling many economic problems3 , it is less suitable for characterizing variety as described in the consumer cities literature. When variety is discussed as a consumption amenity it usually implies a range or count of product sub-categories4 ; a city with five hamburger restaurants has less variety than a city with one hamburger restaurant and four other restaurants serving French, Italian, Chinese, and Mexican cuisines. Furthermore, casual observation indicates that larger cities tend to have specialized or rarer varieties that are not found in smaller cities. In order to quantify and explain any patterns in the distribution of varieties across cities it’s necessary to identify the specific labels of these varieties; a symmetric framework would ignore many possible patterns. However, this categorization approach to variety is difficult to use empirically. While data on tradable goods often has quite granular categorization (e.g., SITC codes), the data on non-tradable consumption amenities seldom has precise information on characteristics of the goods; further, it might not even be clear what is the appropriate classification scheme. For this reason restaurants are particularly well suited to the aims of this paper. Product differentiation is easily measured: restaurant varieties can be identified by cuisine and this categorization is fairly uncontroversial5 . Moreover, transportation costs are often significant in the decision to eat at a restaurant6 , a factor that could make the variety in cities different from that in places with more dispersed populations. Conveniently, there exists a wealth of information about restaurants on the Internet, including precise address information allowing accurate geographic matching of firm counts to demographics data. And finally, restaurants are arguably one of the most prominent and important examples of a city’s not-tradable consumer goods7 . The difference between the firm count and categorization approach to variety can be readily seen in Figure 1. The left-hand panel plots the number of restaurants against population for the cities (Census Places) in my data set and shows a clear log-linear pattern with a slope very close to one. This result was also found in (Berry and Waldfogel 2010) and (Waldfogel 2008) using different data and illustrates a strong proportional relationship between population and restaurant count. The right-hand panel shows the count of cuisines plotted against population for the same cities and displays a very different pattern with far more variance. Explaining this pattern and showing the importance of both consumer characteristics and geography will be the focus of much of this paper. 2 Here I use the wording of Dixit-Stiglitz to describe symmetry. They discuss an asymmetric case of their model in chapter 4 of the compilation ”The Monopolistic Competition Revolution in Retrospect” (Brakman and Heijdra 2004). 3 One prominent example is the new economic geography, see (Fujita, Mori, Henderson, and Kanemoto 2004). 4 Glaeser, Kolko, and Saiz (2001) describe variety as a ”range” of services” and ”specialized retail”; Lee (2010) notes that ”large cites have museums, professional sports teams, and French restaurants that small cities do not have.” 5 Obviously there is some flexibility in categorization but for the purpose of this paper it doesn’t matter whether a restaurant is classified as Southern Italian or Italian as long as the categorization schema is consistent across cities. 6 Intuitively, consumers are not willing to travel very far for a meal, as evidenced by the large number of identical fast food franchises in the same city. 7 Couture (2013) estimates the consumption benefit of greater access to restaurants, both across and within MSAs, and finds large differences when comparing the most dense areas to the least dense. 3 Figure 1: Restaurants and Cuisines vs Population 8 6 4 2 0 0 2 4 6 8 10 Cuisine Count ((log) g) 10 Restaurant Count ((log) g) 8 10 12 14 Pop 2007-8 (logs) Log #Restaurants # 16 8 Fitted values 12 14 Pop 2007-8 (logs) Log #Cuisines #C ((m1)) Slope=1.01, RSq=.86, results for 726 Census Places 1.2 10 16 Fitted values Slope=.49, RSq=.67, results for 726 Census Places Related Literature This paper is related to a large literature on market size and firm characteristics. Syverson (2004) proposes a model in which large markets with many producers allow consumers to easily switch their patronage, thus increasing competition and leading to more efficient firms–a result borne out in the author’s data on the concrete industry. Campbell and Hopenhayn (2005) investigate the link between market size, average revenue, and average employment, and also conclude that competition is tougher in larger markets. Notably, they find that ”eating places,” defined as places to eat with and without table service, have larger average size and greater dispersion of sizes in larger markets. The authors use population and population density as alternative measures of market size but find that their results are roughly the same. While this would seem to downplay the importance of space in market measurement their data set does not include any measures of horizontal differentiation. In my paper I will set aside the issue of firm efficiency and instead focus on how market size affects differentiation, making the assumption that efficiency does not affect the degree of horizontal differentiation. Berry and Waldfogel (2010) study vertical differentiation, or differentiation in quality, and contrast the effect of market size in industries where quality is produced with fixed costs (e.g., newspapers) to industries where quality is produced with variable costs (e.g., restaurants). In industries where quality is tied to fixed costs, increasing market size allows a high quality firm to undercut lower quality firms and thus the market remains concentrated with just a few high quality firms. On the other hand, if quality is produced with variable costs then higher quality firms cannot undercut lower quality competitors and larger markets will show a greater range of available qualities. The authors find that higher quality restaurants are found in bigger cities, similar to my finding that relatively rarer restaurants are found in bigger cities. Apart from this similarity, it is rather difficult to compare their results on vertical differentiation to mine on horizontal differentiation8 . 8 In vertical differentiation models all consumers agree upon standards of quality and quality differences across firms often stem from differences in costs or efficiency. Horizontal differentiation views all firms as equals that cater to different parts of the consumer taste distribution, meaning quality would not be an appropriate measure of horizontal differentiation. Additionally, the authors focus on the availability of high quality restaurants in different markets, limiting their data to the restaurants appearing in 4 Two recent papers consider horizontal differentiation in the restaurant industry and look at the effects of specific populations on the cuisines of local restaurants. Waldfogel (2008) combines several datasets, including survey data on restaurant chain consumers, to show that the varieties of chain restaurants in a zip code correspond to the demographic characteristics of the population. Mazzolari and Neumark (2010) use data on restaurant location and type in California combined with Census data to show that immigration leads to greater diversity of ethnic cuisines. This paper will also advance an argument about the importance of clustered groups with a particular taste but differs in subject and aim from these papers in several important ways. First, while Waldfogel is interested in showing the relationship between restaurant type and demographics at a zip code level and Neumark looks at commuting-defined markets in California, this paper will focus on the city level and use a national set of data. I can then make general statements about cities and variety and relate my findings to Central Place Theory. Second, while Waldfogel looks specifically at fast food restaurants and Neumark at a larger set of mostly ethnically-defined restaurants, I will use data covering all restaurants with very precise categorization (90 cuisines or 450 cuisine-price pairs) so that I can provide a general measure of product diversity for a city. Finally, I develop a model to formalize how entry thresholds are affected by population and space. While this model is quite simple, it allows me to show how the product diversity of a city fluctuates with changes to overall city density. For these reasons I view this paper as complementary in that I provide further evidence of the role of specific preference groups in the location choice of corresponding firms9 but extend this finding to a general theory of demand aggregation that helps to explain why cities differ in the variety of these goods they offer. 2 Population, Land Area, and Entry The essence of my argument is that given positive transport costs there must be enough demand in a small enough space to support a given variety. This general idea is straightforward and was mentioned in the context of restaurants in both Glaeser, Kolko, and Saiz (2001) and Waldfogel (2008). Glaeser, et. al. note that “the advantages from scale economies and specialization are also clear in the restaurant business where large cities will have restaurants that specialize in a wide range of cuisines--scale economies mean that specialized retail can only be supported in places large enough to have a critical mass of consumers.” Waldfogel writes: “some products are produced and consumed locally, so that provision requires not only a large group favoring the product but a large number nearby.” While this demand-side argument is intuitive it is still not clear what defines a critical mass and how entry might be affected by markets with different populations and land areas. Markets with large populations in small areas offer firms greater access to consumers but they may also face greater competition and thus lower markups. Implicitly, a critical mass is a concept about population density but is density sufficient for making predictions about entry or does the effect of density depend upon the geographic area of the market? To address these and other issues I will use a simple model with the objective of showing how the two dimensions of demand aggregation–population and population density– can affect variety even when all cities have identical characteristics. I base this model on Salop’s circular city model of monopolistic competition but rather than normalizing population and land to one I keep these as separate parameters. I add cuisine-specific entry thresholds in the spirit of (Bresnahan and Reiss 1991)10 to define the minimum conditions that would allow the first firm of a cuisine to enter the market. I then map the Mobil and Zagats guides, while I am concerned with the entire range of cuisines, but not quality. 9 Both my paper and Waldfogel discuss a demand-driven explanation but Mazzolari and Neumark (2010) argue that the supplyside, through comparative advantage in ethnic restaurant production, is the more important channel through which local ethnic groups lead to local ethnic restaurants. 10 Bresnahan and Reiss (1991) develop a model of entry thresholds in which a market must satisfy specific conditions in order to permit entry of each successive firm in an industry (from monopolist to perfect competitor). 5 these entry thresholds in population and land space to show how product variety will be affected by different market sizes. I will be discussing a market in which firms are differentiated by both product type and location, and must choose a price given a market with free entry and positive transportation costs. If firms differentiate by both type and location then consumers may value different configurations of firm locations and types equally. For example, a consumer may be indifferent between their preferred variety at one distance and a lesser-preferred variety at a shorter distance. This trade-off between distance and type could result in multiple equilibria or imply the non-existence of an equlibrium11 . In order to make the model tractable I make the strong assumption that firms of different types don’t compete or in this context, that restaurants of different cuisines don’t compete. While this is clearly unrealistic, I believe that the intuition gained from this model still holds for several reasons. First, the idea that there must be a minimum number of consumers in a small enough space to allow entry of a given type must hold with and without inter-type competition12 . Second, the assumption of no competition across types can be viewed as an extreme form of the assumption that firms of the same type compete more closely with each other than with other types. In this paper I am interested in simply showing that there must be a minimum number of consumers in a small enough space to permit a firm of that type to exist, and I do not try to predict the count of restaurants in each cuisine for each city13 nor within city location patterns14 . Narrowing my aims to this objective allows me to make the strong assumption that firms of different types don’t compete. An alternative supply-side argument would suggest that specific types are only found in cities with restaurateurs of that type. However, the supply-side explanation alone is not very convincing: if there is significant demand in a city for a specific type than a restaurateur of that type should move to the city. I therefore focus on providing evidence for this critical mass argument but discuss this alternative explanation in the empirical section. 11 Salop specifies a symmetric, zero profit equilibrium where firms are equally spaced and all earn zero profit. If there are multiple types and asymmetric competition, meaning that a firm of one type competes more strongly with firms of the same type than with firms of other types, then this equilibrium often can’t exist. For example, there can not be an even number of firms of one type and an odd number of firms of another type since some firms would have different neighbors and face more competition, and thus profit cannot be zero for all firms. 12 Consider a market where there are two types of firms, consumers like both types, but all consumers prefer one type to the other. When two asymmetrically-differentiated firms compete the greater-preferred firm always has an advantage over the lesserpreferred firm, and thus demand conditions must be quite favorable for the lesser-preferred firm to exist. I will show that even without competition across types, a market must have a minimum population, which varies with land area, in order to sustain any given type. Therefore allowing competition between firms simply makes it even more difficult for a lesser-preferred firm to exist. 13 Mazzeo (2002) develops a model of oligopoly where firms make entry and product quality decisions simultaneously and estimates the distribution of motels across quality types for small exits along US highways. Unfortunately this model is less relevant to the monopolistically competitive restaurant industry where simultaneous entry of thousands of differentiated firms seems a very strong assumption. Further, while Mazzeo looks at markets with a small number of motels across three quality types, the markets in my dataset have thousands of restaurants with up to 82 cuisines, making estimation intractable. 14 In their theoretical paper Irmen and Thisse (1998) show that when duopolists compete in multiple dimensions they will choose to maximally differentiate in one dimension and minimally differentiate in all other dimensions. It is tempting to try and apply this result to the context of restaurant locations but for several reasons the industry is not a good fit. As noted above, cities have thousands of restaurants and Tabuchi (2009) shows that once there are three or more firms this max-min result no longer holds. Further, restaurant consumers are not uniformly distributed in location or characteristics space, consumer tastes themselves do not fit easily into a continuous space (how different is Italian from Japanese?), and restaurants enter markets sequentially over long periods of time making current location patterns path dependent. Studying location choice with product differentiation in the restaurant industry is a fascinating topic but beyond the scope of this paper. 6 2.1 Entry Threshold for a Single Firm I will use the classic Salop circular city model to derive minimum conditions of population and land area that allow entry (see appendix for a brief discussion integrating my results with Salop’s paper). In Salop’s model (Salop 1979) consumers are located uniformly around the perimeter of a circle and must decide whether to purchase a good from a firm or consume their reserve good. Firms also locate around the perimeter of the circle and can enter the market freely. Consumers are utility maximizers and receive utility u1 from the firms’ product and utility u0 from the reserve good. There is positive transportation cost per unit distance, τ, and thus a consumer located at l ∗ will purchase from a firm located at li with product price pi only if the net utility of this transaction is higher than the consumer’s reserve utility. max[u1 − τ|li − l ∗ | − pi , u0 ] (1) This paper is concerned with entry and thus I focus on the case of a single firm deciding whether to enter the market, a potential monopoly’s entry problem. A consumer will only purchase from this firm if the price and transportation cost are low enough. Define d as the distance that would make a consumer indifferent between the firm’s good and their reserve utility: d= u1 − u0 − p τ (2) From the firm’s perspective, the geographic extent of their market is the sum of the distances to the indifferent consumer on either side of the firm: g = 2 ∗ d. We then have: p = u1 − u0 − τg 2 (3) Demand for the firm’s product is the geographic extent multiplied by the population density, D = NL . The firm must pay a fixed cost F to enter and then produces the good with constant marginal cost c, making profit: τg Π = u1 − u0 − − c Dg − F (4) 2 The monopoly will choose the geographic extent that maximizes profit, which I will refer to as L∗ : g∗ = u1 − u0 − c ≡ L∗ τ (5) If the profit-maximizing geographic extent is actually larger than the total market area, L∗ > L, the monopolist will sell to the whole market, g = L. By writing average revenue, marginal revenue, and marginal cost as a function of g I can show the monopolist’s problem of choosing the geographic extent graphically in Figure 215 . The quantity sold is q = Dg, and thus density is just a scaling factor for these three functions that does not affect the monopolist’s choice of g. I scale the vertical axis by density, making the units D$ , in order to show the problem for any density. In the left hand panel of Figure 2 the horizontal axis shows the monopolist’s choice of g. If the market area is large enough, L∗ ≤ L, the monopolist chooses g = L∗ where the marginal revenue curve intersects marginal cost. If L < L∗ the monopolist is constrained and chooses g = L; this case is analogous to a monopolist choosing quantity with a capacity constraint. I define “full coverage” as the situation where the single firm sells to every consumer in the market, or g = L, and “partial coverage” as when the firm sells to a subset of consumers, g = L∗ < L. The two cases converge at L = L∗ 15 Average revenue is AR(g) = D u1 − u0 − τg 2 , marginal revenue is MR(g) = D (u1 − u0 − τg), and marginal cost is MC(g) = Dc. 7 Figure 2: Geographic Extent and Minimum Density Population Density HNLL $D u1-u0 A B ACAHgL ACBHgL MRHgL 2N *L* ARHgL MCHgL L*2 L* 1.5L* 2L* Full Coverage Market Extent HgL L*2 (a) Monopolist Choice of Geographic Extent Partial Coverage L* 3L*2 Land Area HLL 2L* (b) Minimum Density Given Land Area since the monopolist chooses g = L∗ . Given the monopolist’s choice of g, the necessary condition for entry is that profit is weakly greater than zero. I consider the boundary case where profit is equal to zero—the minimum condition for the first firm to enter—and write average revenue and average cost in terms of g: F τg = Dc + AR(g) = AC(g) : D u1 − u0 − 2 g F D = g u1 − u0 − c − τg 2 (6) (7) Equation 7 yields a unique density for every g: this is the minimum density in the market that would allow the first entrant. Point A in Figure 2 shows an average cost curve drawn for the level of density that would make the monopolist’s profit equal to zero for geographic extent L∗ /216 . Point B shows the average cost curve for g = L∗ , and is tangent to average revenue since marginal revenue is equal to marginal cost at L∗ . Incorporating the monopolist’s choice of g given the city’s land area L, I plot the population density that makes profit equal to zero against L in the right hand panel of Figure 2. It can be seen that the required density decreases monotonically until reaching a minimum at L = L∗ . If the monopolist were to choose a market extent g > L∗ the required density would actually increase since marginal profit is negative. However, for all L > L∗ the monopolist chooses g = L∗ and thus the required population density is constant for markets with area greater than L∗ . This constant density can be defined by a particular expression of population as a ratio of the fixed cost, the difference between utility from the firm’s good and the reserve good, and the marginal cost: F F (8) N∗ = = ∗ u1 − u0 − c τL ∗ The constant density for markets with land area of L∗ or greater is thus D = 2N L∗ . By rearranging equation 7 and substituting NL for D I can write the expression giving the minimum population required for entry as a function of land: 2N ∗ L∗ L Nmin (L) = (9) g(2L∗ − g) 16 Average F cost is plotted on the $/D scale and thus the curve plotted is average cost divided by density: c + Dg . 8 Adding the firm’s choice of g as a function of the market’s land area yields: ∗ ∗ 2N L ∗ 2L∗ −L if L ≤ L , ”full coverage” Nmin (L) = 2N ∗ L if L∗ < L, ”partial coverage” L∗ (10) When land area is equal to zero, L = 0, the minimum population is N ∗ while when L ≥ L∗ then the population ∗ must be large enough such that the density is always D = 2N L∗ . In the left-hand panel of Figure 3 the bottom line, “Nmin (L; n = 1)”, shows the minimum population as a function of land area, with the break in the function at L = L∗ . In the same panel I have also drawn the minimum population frontiers for n = 2 and n = 3 firms17 . As noted earlier, the focus of this paper is on the extensive margin–when does a market have a given variety–but I draw the frontiers for 2 and 3 firms to show how the minimum conditions derived hold for markets with multiple firms. For markets with large land areas and populations just below the frontier, such as a market with L = 3L∗ and N = 6N ∗ − ε, the model suggests that a small increase in population would allow the market to go from having zero firms to three firms. What this shows is that while the count of firms can change dramatically with small changes in population or land area, the extensive margin is still governed by the minimum population frontier. Figure 3: Minimum Market Conditions: Land, Population Minimum Population Minimum Population NminHL; n=1,∆=.1L NminHL; n=2L 6N * 9N *2 * 3N 2N * N* NminHL; n=1,∆=.2L NminHL; n=3L N .1 NminHL; n=1L L*2 B NminHL; n=1,∆=.5L N .2 N *.5 * L* 4L*3 No entry 2L* 5L*2 3L* Land Area (a) Multiple Firms 2.2 A * L*2 L* 3L*2 2L* Land Area (b) Multiple Types Population, Land, and Variety To investigate variety I will assume that consumers have heterogeneous tastes and will only consume their preferred variety. There are V different varieties in the market and the distribution of varieties can be repreV sented by the vector δ = {δ1 , δ2 , ..., δV }. Consumer have a taste for only one variety so that ∑ δi = 1. I will i=1 further assume that consumers are located uniformly throughout the perimeter of the circle so that if I were to randomly select any segment the percentage of consumers favoring cuisine v is always equal to δv , the 17 With multiple firms there are three possible equilibria for a given number of firms, depending upon the land area. These conditions follow directly from (Salop 1979)–see Appendix for a short explanation rewriting his equations in my framework. 9 percentage of that taste in the population18 . Firms of type v only compete for the total number of customers of type v, equal to N ∗ δv . All firms, regardless of type, have the same fixed cost F and marginal cost c and thus have the same minimum population for each value of land. If the market has N consumers but only δv percent can potentially consume product type v then the minimum conditions for a firm of type v to enter the market become: 1 2N ∗ L∗ ∗ δv ∗ 2L∗ −L if L ≤ L , ”full coverage” (11) Nmin (L; δv ) = 1 2N ∗ L ∗ if L < L, ”partial coverage” δv ∗ L ∗ Under these assumptions, I can rank varieties by the percentage of consumers who prefer the variety, δv . In order for a firm to enter a market and sell a low δv variety the market must have a relatively higher population and relatively smaller land area. Further, the minimum population required for less-preferred varieties increases faster in the amount of land in a city: α L∗ if L ≤ L∗ , ”full coverage” ∗v 2 ∂ Nmin (L; δv ) (2L −L) = (12) ∂L 2N ∗ ∗ δv L∗ = αv if L < L, ”partial coverage” The right-hand panel of Figure 3 provides an example of mapping varieties to markets in land-population space. In the figure, market A has three varieties while market B only has one variety, despite having a larger population. The number of varieties is increasing to the north and west, although this is dependent upon where the boundary lines are. Holding land constant, more populous markets will have more varieties and holding population constant, smaller geographic markets will have more varieties, given that the city is above the minimum population threshold. Figure 3 also suggests a highly hierarchical relationship between the number and composition of varieties found in a market. Specifically, if market i has more varieties than market j then market i will have all of the varieties found in market j; if a market has more varieties than another it is because it can support the less-preferred (smaller δv ) varieties. More formally, since the frontiers cannot cross—Nmin (L; δi ) > Nmin (L; δ j ) if δi < δ j —I can define each ∗ frontier uniquely by its population intercept, Nδv . Each market can then be defined by the intercept of the frontier that would pass through the market’s location in land-population space, Im . Since each intercept can ∗ be interpreted as Nδv , this v is the variety preferred by the smallest percentage of people that market m can support (whether or not a variety preferred by that percentage of people actually exists). For example, in Figure 3 market B is on a frontier between the first and second varieties and has an intercept between N ∗ /.5 and N ∗ /.2. Generally, for markets m and l, if Im > Il ⇒ #Varietiesm ≥ #Varietiesl where the weak operator stems from the fact that with discrete varieties a higher frontier may still not be high enough for the next variety threshold. I can use this relationship to make ordinal statements about how population and land affect the number of varieties in a market. Nm L∗ Lm #Varietiesm ∼ Im = Nm 1 − ∗ 1(Lm ≤ L∗ ) + 1(L∗ < Lm ) (13) 2L 2Lm 18 An alternative and equivalent assumption would be to assume all consumers are identical and consume δv amount of each cuisine. Note that this alternative assumption could be considered one form of a ”taste for variety.” If one city offers more variety than another then the representative consumer will consume more restaurant meals in the more diverse city. 10 Specifically (and dropping subscripts): L∗ ∂ #Varieties L ∼ 1 − ∗ 1(L ≤ L∗ ) + 1(L∗ < L) > 0 ∂N 2L 2L ∗ ∂ #Varieties −N −NL ∗ ∼ 1(L ≤ L ) + 1(L∗ < L) < 0 ∗ 2 ∂L 2L 2L (14) (15) The first equation shows that the count of varieties is increasing in population while the second equation shows the variety count decreasing in land area. The ability to make ordinal statements about the count of varieties stems directly from the hierarchical relationship. To summarize, the theory offers the following predictions: 1. Controlling for demographics, the existence of a variety in a market can be determined by an entry threshold in land-population space where the intercept is higher and the slope steeper for less-preferred varieties 2. For a given variety and demographic profile, more populous markets and smaller geographic markets are more likely to have the variety 3. Further, given enough similarity in the demographic profiles across markets there will be a hierarchical relationship between the number of varieties and the composition of those varieties 3 Describing City Product Variety 3.1 Data Collection In order to study the relationship between market characteristics and product differentiation, one needs a data source that satisfies several requirements. First, there must be a consistent categorization of firms into varieties. Second, the data set must be exhaustive; if there is only data on select firms in the market then it is not possible to compare counts of variety across markets. Third, the data set must have precise geographic information on locations so that firms can be matched with the appropriate data on market characteristics. Finally, the data set must cover a sufficient number of markets to allow comparisons across markets. These requirements rule out the use of restaurant guides (not exhaustive, only cover a few markets) and information directories or yellow pages (inconsistent categorization of types). The online city guide Citysearch.com has exhaustive listings and covers many US cities19 . Additionally, while the same restaurant may be listed under multiple cuisine headers, the actual entry for that restaurant lists one consistent, unique cuisine. Furthermore, the entry for the restaurant also lists an exact street address. This allows me to avoid the difficulty of reconciling census city boundary definitions to the boundary definitions used by the site in order to find the appropriate city demographic (Census) information. In the spring of 2007 and the summer of 2008 I used a software package and custom programming to download all the restaurant listings for the largest cities listed on the site. I attempted to collect data for the 100 most populous US Census places and ended up finding 88 Citysearch cities matching these Census places. However, the Citysearch definition of cities often extended far beyond the Census place geography. For example, the listing for “Los Angeles” included restaurants in the Census places for “Beverly Hills,” “Long Beach,” “Santa Ana,” “Santa Monica” and many smaller cities. I 19 When I collected my data this website appeared to be the most popular of its type; today Yelp.com has many of the same features and seems to be more prominent. 11 therefore ended up collecting many Census places within the vicinity of large cities (in estimation I will use MSA fixed effects when appropriate). Since I will be using demographic data to explain characteristics of a city’s restaurant industry it’s important that my data for each city is fairly complete. In order to gauge how close the Citysearch data was to the complete set of restaurants for every Census place I matched the count of Citysearch restaurants to the count found in the 2007 Economic Census, combining the categories “Full Service Restaurants” (NAICS 7221) and “Limited Service Eating Places” (NAICS 7222). While close to the Citysearch types of restaurants, the Economic Census includes some restaurants not always covered by Citysearch data, such as fixed location refreshment stands, and therefore I expect that the Economic Census will record more restaurants for every Census place than Citysearch. I define the ”match ratio” for each Cen#CitySearchRestaurants and keep all Census places with a match ratio between sus place as MatchRatio = #EconomicCensusRestaurants 20 .7 and 1.1, leaving 726 Census Places . I categorize each restaurant with two separate cuisine measures. I denote the cuisine alone as “cuisine measure 1” (ex: Italian, Ethiopian) and denote “cuisine measure 2” as the cuisine-price pair (ex: Italian 1$, Ethiopian 2$) where the price can range from 1$ to 4$. Overall, about 40% of the restaurants have price data and in defining cuisine measure 2 (m2) I break up each cuisine into 5 subgroups: one subgroup for each of the four price levels and another if the price is missing. Given the fill rate and coarseness of these prices I will concentrate mainly on the m1 measure and use the m2 measure as additional evidence. In Table 12 (Appendix) I list all the cuisines and the count of cities in each land quartile with that cuisine. The rarest m1 cuisines are Armenian and Austrian, found in just two cities21 while there are a number of cuisines found in every or nearly every city (Chinese, Deli, Fast Food, Italian, Mexican, Pizza). The rarest m2 cuisines do not always correspond to m1; for example “Caribbean” restaurants are found in 96 cities but only 3 cities have a 4$ Caribbean restaurant. Table 1 shows summary statistics for the 726 cities by land quartile. Both cuisine measures are larger for geographically bigger cities as well as the count of restaurants. The demographic characteristics, with “Young” and “Old” categorizations following Berry and Waldfogel (2010), are quite similar across land quartiles. The statistic ethnic HHI is calculated as the sum of the squared shares of each ethnicity in a city and is somewhat lower for larger cities, indicating greater ethnic diversity. 3.2 Descriptive Evidence Before testing the model’s predictions I first provide some descriptive evidence of how restaurant diversity differs across cities. In Figure 4 the blue dots in the left panel represent the number of cuisines (measure 1) plotted against the number of restaurants for all 726 Census Places, where both axes are in logs. As the number of restaurants increases the number of cuisines first rises rapidly and then becomes roughly linear (in logs). The number of cuisines rises far more slowly with the number of restaurants than would be predicted from simply randomly assigning cuisines to restaurants with equal probability over all cuisines (results from uniform multinomial simulations available upon request and in earlier versions). However, one might also wonder how this pattern compares to randomly assigning cuisines to restaurants based on the observed nationwide distribution of restaurants to cuisines. A theory underlying this type of null distribution could be that the cuisine of a restaurant is determined entirely by the cuisine-specific skills of the restaurateur and the 20 I dropped New Orleans because of damage from Hurricane Katrina, Anchorage, Alaska because the Census place geographic definition is very different from other cities (it includes an enormous swath of virtually uninhabited land), and Industry, California, which is almost entirely industrial (only 777 residents but many firms) and thus a very large outlier in restaurants per capita. Washington, DC is not in my data set because the DC site was hosted by the Washington Post and used a completely different page format, leading to difficulties in data collection. 21 It’s worth emphasizing that this is the “primary” cuisine for the restaurant; there may be German restaurants that serve Austrian food and use “Austrian” as an additional cuisine but only one city has restaurants whose “primary” cuisine is Austrian. 12 Table 1: Summary Statistics # Restaurants # Cuisines (m1) # Cuisines (m2) Population 2007‐08 (thousands) Land Area (sq km) Density (Pop per sq km) MSA Population 2000 (millions) Average HH Size Median HH Income (thousands) Ethnic HHI %Young (<35yrs) %Old (>64yrs) %College (completed for 25yrs+) Mean 27.1 10.4 12.9 16.12 9.79 1,766 5.39 2.59 $50.0 0.79 14% 48% 33% Land Qrt 4 (n=181) Std. Dev. [Min, Max] 29.4 [4, 192] 6.7 [2, 38] 11.0 [2, 78] 10.97 [3.14, 75.7] 3.16 [2.61, 14.93] 1,308 [326, 12143] 5.06 [0.30, 21.20] 0.45 [1.71, 4.37] $17.6 [$17.7, $134.3] 0.19 [0.26, 0.99] 6% [4%, 43%] 8% [21%, 69%] 17% [4%, 81%] Mean 51.8 14.5 18.9 29.30 21.73 1,342 5.64 2.59 $50.9 0.80 13% 49% 36% Land Qrt 3 (n=182) Std. Dev. [Min, Max] 51.9 [5, 359] 7.8 [3, 43] 13.7 [3, 96] 20.95 [4.6, 107.05] 4.28 [14.95, 29.99] 935 [243, 6429] 5.02 [0.30, 21.20] 0.32 [1.82, 3.59] $16.6 [$24.2, $146.5] 0.19 [0.25, 0.99] 5% [3%, 37%] 7% [27%, 81%] 15% [10%, 75%] Mean 91.2 18.7 25.7 53.78 43.95 1,233 5.46 2.61 $56.2 0.78 12% 49% 39% Land Qrt 2 (n=181) Std. Dev. [Min, Max] 72.0 [6, 380] 8.1 [3, 45] 14.5 [3, 90] 35.87 [6.11, 239.18] 9.10 [30.12, 61.31] 802 [175, 6191] 5.06 [0.15, 21.20] 0.29 [1.98, 3.65] $19.3 [$26.8, $139.9] 0.18 [0.17, 1] 5% [3%, 30%] 6% [33%, 68%] 16% [11%, 78%] Mean 531.3 29.1 52.2 331.38 229.89 1,315 4.52 2.62 $49.1 0.76 10% 52% 36% Land Qrt 1 (n=182) Std. Dev. [Min, Max] 1241.9 [8, 13664] 14.1 [3, 82] 41.2 [4, 277] 750.08 [7.15, 8328.5] 296.76 [61.54, 1962.37] 1,192 [55, 10601] 4.49 [0.15, 21.20] 0.31 [2.02, 4.12] [$24.5, $111.8] $15.4 0.15 [0.23, 0.97] 4% [3%, 34%] 6% [28%, 66%] 13% [7%, 71%] restaurateurs in every city are drawn from a nationwide distribution across skills. If some skills are relatively rare and others are quite common then cities with many restaurants are more likely to have a rare cuisine and cities with few restaurants will have just common cuisines22 . An implication of this skill-set hypothesis is that every restaurant exists in its own independent market, unaffected by city level characteristics. Therefore aggregating a city’s n restaurants and looking at features of the cuisines should be no different from randomly drawing n restaurants from many different cities. Thus to compare to this hypothesis I draw restaurants for each city from the nationwide pool with replacement and then for each city show the 1st and 99th of the number of cuisines from 1000 simulations23 . This means that confidence bands shown in the left-hand panel of Figure 4 for each city do not come from the same replication (simulation run) but rather represent the city-specific bands, across all runs (similar to looking at a distribution of maxima). The figure shows that for many cities the observed number of cuisines is significantly below even the 1st percentile of the simulations. To look at the likelihood of finding so few cuisines across many cities in the same replication I run locally weighted regressions (lowess) of log cuisines against log restaurants for each replication and then show the 1st and 99th percentile bands from the predicted values. I compare this to the predicted values from a lowess regression on the observed data24 . The confidence bands are quite narrow and the observed 22 In this paper I wish to show features of the observed distribution and then suggest a model that would generate this distribution. If the observed distribution across cities is not exogenous but rather generated by features of cities, as suggested in my model, then testing against the empirical distribution can be problematic. As an example from a different context, we may believe that highly specialized doctors are found in large cities because the pool of patients who might have a specific ailment is larger, or the supply of equipment and complementary labor is greater, or a host of other features of large cities (Baumgardiner (1988) suggests specialization is endogenous to local market conditions). If we took the empirical distribution of doctors to specialties and then randomly assigned doctors to specialties from this distribution then large cities, which have more doctors, would have more specialized doctors. However, this type of test could falsely reject the theory since the theory suggests a distribution and the test would be effectively assuming that distribution. Nonetheless, in the case of restaurants the observed distribution of cuisines across cities is even quite different from the empirical distribution of restaurants across cuisines and so I use this comparison distribution for robustness. 23 Results from simulations without replacement are even further from the observed data. 24 While the percentile bands for two cities could still come from different replications the predicted values for any city are affected by all the other cities in that run and thus this technique is an approximation to looking at the whole cuisine-restaurant distribtion across many replications. 13 data is significantly below the 1st percentile for every city except the very largest cities, of which there are few. Therefore, even in comparison to the skill-set theory the number of cuisines rises more slowly with the number of restaurants, consistent with a threshold model. Figure 4: Number of Cuisines vs Number of Restaurants Lowess Plot of Log M1 Cuis~Log Restaurants with CI from Empirical Distribution (w replacement) Number cuisines, log scale 20 40 6080 Number cuisines, log scale 20 40 6080 100 Number M1 Cuisines against Number Restaurants with CI from Empirical Distribution (w replacement) 5 10 15 5 Number of restaurants, 000’s, log scale number m1 cuisines 1st to 99th pctile band (simulation) The CI were calculated by drawing the number of restaurants for each city from the empirical distribution with replacement. I then take the 1st and 99 percentiles of the number of cuisines, drawing separately for each city. 10 15 Number of restaurants, 000’s, log scale 1st, 99th pctile (sim) predicted # m1 cuisines (data) The CI were calculated by drawing the number of restaurants for each city from the empirical distribution with replacement. I then run a lowess regression for each of the 1000 simulations and plot the 1st and 99 percentile range of lowess predicted values (a) Percentile Bands (b) Lowess Plot In addition to the count of cuisines across cities, there is also a systematic, hierarchical pattern to the specific cuisines found in each city and the number of restaurants. Mori, Nishikimi, and Smith (2008) investigate the distribution of industries across Japanese cities and find a strong hierarchical pattern that results in several empirical regularities. Hsu (2012) finds a similar pattern in US data and proposes a model of Central Place Theory consistent with these regularities. In Hsu’s model (2012) scale economies in production lead to a central place hierachy but he also notes that heterogeneity in demand would lead to the same hierarchical structure of goods across cities. While in this paper I focus on non-tradable consumer products and also incorporate spatial concentration in addition to population size, the underlying mechanism of my model–demand aggregation–is consistent with Hsu’s model. I therefore use several of the techniques from MNS (2008) to describe the pattern of cuisines across cities and show that this pattern is quite similar to the Central Place patterns found in the distribution of industries across cities. In Figure 5 I show hierarchy diagrams from MNS for each cuisine measure. For each cuisine I count the number of cities that have that cuisine, “choice cities,” and for each city I count the number of cuisines in the city. On the vertical axis I plot the rank of cuisines by decreasing choice cities (rank 1 is the least common cuisine) and on the horizontal axis I plot the rank of cities by increasing number of cuisines (the rank 1 city has the fewest cuisines)25 . Each observation is a city-cuisine pair and it can immediately be seen that cities with more cuisines also have the rarer cuisines. Further, if a city has a rare cuisine that city also tends to have all of the more common cuisines. This implies that simply knowing the count of cuisines allows prediction of the specific cuisines found in the city. 25 While MNS plot the actual choice city count and number of industries I use the rank because there are cuisines with the same count of cities, and cities with the same count of cuisines, and thus many observations would be hidden behind single points. Here I break ties arbitrarily but use this only as a graphical method; in the formal testing of hierarchy I will follow the test from MNS exactly, which allows for ties. 14 cuisine rank (ascending by count of choice cities) 0 100 200 300 400 cuisine rank (ascending by count of choice cities) 0 20 40 60 80 100 Figure 5: Hierarchy Diagrams 0 200 400 600 city rank (ascending by count of cuisines) Data for 726 places, cuisine measure 1 800 0 200 400 600 city rank (ascending by count of cuisines) 800 Data for 726 places, cuisine measure 2 (a) Cuisine Measure 1 (b) Cuisine Measure 2 MNS propose a hierarchy statistic that captures this pattern and then compare the statistic to draws from a uniform multinomial. When I do this (see Appendix) I find that the pattern of cuisines across cities is far more hierarchical for both cuisine measures than that from a uniform distribution across cuisines. However, their test implies that comparison distributions must be at the cuisine level, meaning that in simulations for each city I draw n cuisines, rather than n restaurants and then determine the number of cuisines26 . In order to compare the hierarchical pattern in the data to simulations from the empirical distribution of restaurants (skill-set hypothesis) I use a closely related technique from the same paper, the Number Average Size plot. For each cuisine I calculate the average number of restaurants found in the corresponding choice cities. In the left-hand panel of Figure 6 I plot the 90 m1 cuisines with the choice cities on the horizontal axis and the average number of restaurants on the vertical axis (blue dots); as an example, the point (222, 462) corresponds to the Indian cuisine and indicates there are 222 cities with an Indian restaurant and the average number of restaurants (across all cuisines) for those cities is 462. There is a linear in logs relationship with an elasticity of −.55 between the average number of restaurants and choice cities such that relatively rare cuisines (few choice cities) are found only in cities with large numbers of restaurants. On the right I plot the 359 m2 cuisines and also find a linear in logs relationship (elasticity −.38) but there is more deviation for cuisines with few choice cities. Some of this likely stems from noise in the measure itself (see earlier discussion) but it may also reflect the fact that by cutting the cuisines so finely (there are many found in only one city) the average number of restaurants will have much more variance. I compare this to the 1st and 99th percentiles from simulations in which I draw from the empirical distribution of restaurants with replacement, as done in the earlier exercise. Again, the bands are calculated at the cuisine level and thus represent the percentiles across all simulations for each cuisine. The plots shows that the average number of restaurants in the choice cities of each cuisine is often higher than the 99th percentile from the simulations, indicating that rare cuisines are found in fewer and larger cities than would 26 The problem with drawing at the restaurant level is that even for strongly hierarchical distributions, cities with many restaurants will receive many cuisines. This leads to many cuisines being found in every city, which differs from the observed pattern, but still results in a high hierarchy statistic. 15 be predicted. While the simulation results are also linear in logs, that pattern is not nearly as steep with both the intercept and the elasticity from the observed data greater than the 99th percentile of the simulations. This shows that the skill-set hypothesis would not result in such a strong hierarchical pattern across cities. Figure 6: Number Average Size Plots: Average Number of Restaurants in Cities with a Given Cuisine NAS Plot for Cuisine M2 mean # restaurants, 000’s, log scale 5 1015 mean # restaurants, 000’s, log scale 5 1015 NAS Plot for Cuisine M1 200 400 600800 200 # choice cities, log scale average # restaurants 400 600800 # choice cities, log scale 1st to 99th pctile band (simulation) The CI were calculated by first drawing over the number of restaurants for each city from the empirical distribution with replacement. I then calculate average number of restaurants in each cuisine and take the 1st and 99 percentiles of these averages. I plot each cuisine against the number of choice cities from the data. When multiple cuisines have the same number of choice cities I take the average. The slope (elasticity) is −.55 and the intercept is 9.04, both greater in magnitude than 99th percentile of simulation. average # restaurants 1st to 99th pctile band (simulation) The CI were calculated by first drawing over the number of restaurants for each city from the empirical distribution with replacement. I then calculate average number of restaurants in each cuisine and take the 1st and 99 percentiles of these averages. I plot each cuisine against the number of choice cities from the data. When multiple cuisines have the same number of choice cities I take the average. The slope (elasticity) is −.38 and the intercept is 8.4, both greater in magnitude than 99th percentile of simulation. (a) Cuisine Measure 1 (b) Cuisine Measure 2 Lastly, to show how this hierarchy relates to popuation and land area I estimate a very simple version of my model with linear thresholds and no demographic characteristics. Let Cmv be a binary variable indicating whether variety v exists in market m with a population threshold that is linear in land area: ( ∗ 1 if Nm − αv ∗ Lm ≥ Nδv Cmv = (16) 0 o/w A restaurant of cuisine v only locates in market m if the population, Nm , is above a threshold that increases with cuisine-specific slope αv in land area Lm . If I allow for some unobserved heterogeneity in tastes then I can rewrite the above equation with error term εmv and estimate as a limited dependent variable model: Pr(Cmv = 1) = Pr(Π∗mv > 0) Π∗mv = γ1v Nm + γ2v Lm + ηv + εmv Following the theory, I expect the γ1 ’s to be positive, the γ2 ’s to be negative, and the cuisine fixed effects, 2v ηv ’s, to be negative. Further the ratio γγ1v represents the αv parameter27 , which gives the number of additional people required for a city to have a cuisine, along the frontier, if the land area is increased by one unit. The N∗ v ratio −η γ1v gives the population intercept for each cuisine ( δv )—the minimum number of people if there was no land/transportation cost. Both ratios should be greater for rarer cuisines. I assume that the error term is distributed standard logistic and estimate the above specification with a logit model28 . I estimate each cuisine 27 In the model a cuisine is found in a city if the population is greater than the threshold frontier for a given land value. This requires the coefficient on population be equal to one, which is equivalent to dividing the estimation results by γ1v (coefficient on population). 28 I also estimated the model with a probit and found similar results but with a slightly lower log likelihood for most cuisines. 16 separately and exclude cuisines when the estimated model fails a likelihood ratio test at the 5% level29 . I restrict the analysis to cuisine measure 1, which has no missing data and thus yields a clearer interpretation. Overall, I find that 82 of the 85 cuisines have a positive population intercept of which 74 are significant at the 10% level and 68 at the 5% level30 . In the left panel of Figure 7 I plot all the positive population intercepts significant at the 10% level against the corresponding city count with log axes. The clear log-linear relationship shows that the fewer the number of cities with a cuisine, the larger the population intercept31 . Turning to the frontier slope estimates (αt ’s) I find that 60 of the 85 estimates are positive with 36 significant at the 10% level and 34 significant at the 5% level. The right panel of Figure 7 shows the positive and significant (10% level) slope estimates against city count and again a strong log-linear pattern emerges. es stimated slope on sq km land arrea (000's) 1 2 3 4 estimated p e population threshold (millions) 5 10 15 Figure 7: Plotting intercept and slope threshold estimates against city count 200 200 400 600 Results for 74 cuisines with population thresholds significant at 10% level, scale in logs 400 600800 # choice cities # choice h i cities iti Results for 36 cuisines with slope estimates significant at 10% level, scale in logs (a) Intercept estimates (b) Slope estimates The results from this section follow the model’s prediction that rarer cuisines are only found in bigger, denser cities and suggests a fairly consistent ordering of tastes across cities, even if the actual proportions differ. There is a strong hierarchical pattern to the distribution of cuisines across cities that is statistically different from the distribution of cuisines across restaurants. This pattern is consistent with the proposed model of entry thresholds and quite similar to the Central Place Theory regularities found in the distribution of industries across cities from other papers. 29 The model failed the likelihood ratio test for some of the cuisines found in very few cities, specifically: “Burmese” (4 cities), “Dim Sum” (4), “Polish & Czech” (4), “Tibetan” (3), and “Chowder” (6). 30 I used the ”nlcom” package of Stata which uses the delta method to compute standard errors for the ratio of coefficients. 31 I restricted the plot to positive estimates in order to show the strong log-linear relationship however it is informative to look at the three cuisines that had negative population intercept estimates: “Deli,” “Fast Food,” and “Pizza.” These three cuisines are found in nearly every city and are thus consistent with the general downward sloping pattern between population and city count. Additionally, they may benefit the least from locating in a large dense market since they represent fairly common tastes and are found in many locations in large markets, often with multiple outlets of the same franchise. 17 3.3 Restaurant Ecology: Alternative Measures of Diversity The simple model presented in this paper does not allow cross-cuisine competition and therefore its implications are unlikely to be useful in predicting the specific number of restaurants in each cuisine in each city. However, as a descriptive exercise it’s informative to examine how demand aggregation affects general distributional measures of restaurants across cuisines. For example, is the share of restaurants in each cuisine more even in larger cities? These distributional measures of diversity have been considered at length in the ecology literature in the context of species diversity. Jost (2006) points out that many of the different measures of diversity in ecology (and in economics) follow a common form: S q D= ∑ i=1 ! q pi 1 1−q S ! and when q = 1: 1 D = exp − ∑ pi ln(pi ) (17) i=1 In this notation S is the count of species (cuisines), pi is the share of the total organisms in species i (restaurants in cuisine i), and the q is denoted the “order of diversity.” When q = 0 the function reduces to the simple count of species. When q = 1 the function is defined by its limit and is equal to the exponential of the Shannon entropy, which I will refer to as ”Shannon diversity.” When q = 2 the diversity measure is equal to the inverse of the Simpson concentration, or the inverse of the Hirfindahl Hirschmman Index (HHI) of market concentration in economics. Jost notes that as the order of diversity increases the weight on the least common species decreases, with equal weighting of rare and common species at q = 1. Without cross-cuisine competition my model implies that the share of restaurants in each cuisine should not be affected by population and land area except through the entry/exit of cuisines32 . This is because the share of total restaurants in a cuisine is always proportional to the percentage of the population with that taste. Therefore as population and land area change the model would predict that the only effect on higher order diversity measures (q > 0) would come through changing the number of cuisines. I can look directly at the distribution of the share of restaurants in each cuisine by calculating measures of “evenness.” These measures are used to evaluate the relative frequencies of different species in an environment (Olszewski 2004). I calculate cuisine evenness as a given diversity index divided by the count of cuisines, which constrains the measure between 0 (least even) and 1 (most even). In Figure 8 I plot three measure of diversity (q = 0, 1, 2) and their corresponding evenness indices against log population, using the two different cuisine measures. For clarity I have plotted the smoothed estimates from a locally weighted regression of each measure against log population. Looking at the diversity measures, the number of cuisines rises rapidly while the Shannon and Simpson diversities rise slowly. Further, the evenness measures decline monotonically in city population, indicating that bigger cities have a far less even distribution across cuisines. In theory this does not have to be the case: if ethnicity was the main factor driving cuisine diversity and bigger cities had a more even distribution across ethnicities then we might expect to see the number of cuisines and evenness increasing with population. Empirically however, larger cities have more cuisines but there are fewer restaurants in these additional cuisines, which decreases the evenness. These plots are consistent with the model in that the greater restaurant diversity of larger cities occurs through the addition of rarer cuisines. 32 This is not precisely correct because changing population or land area could change the equilibrium for a subset of the cuisines in a city. The equilibrium for each cuisine determines the number of firms and depends upon the density of consumers (see discussion of multiple firms in Appendix). It’s possible that in the same city firms selling a rare cuisine, small δ , face a low enough density of consumers to be in the monopoly equilibrium while firms selling a more common cuisine are in the competitive equilibrium. Changing the population or land area could switch the equilibrium for these cuisines, and thus their relative shares of restaurants, without entry or exit of a new cuisine. I consider this a technical point that is not empirically testable with my data. 18 .8 Evenness measures 200 1 80 Figure 8: Distributional Measures of Cuisine Diversity 8 10 12 Population 07-08 (logs) Number Cuisines (m1) Simpson Diversity (m1) Simpson Evenness (m1) 14 16 .8 .4 .6 Evenness 8 Shannon Diversity (m1) Shannon Evenness (m1) 10 12 Population 07-08 (logs) Number Cuisines (m2) Simpson Diversity (m2) Simpson Evenness (m2) (a) Cuisine Measure 1 4 .2 0 Diversity measures 0 0 0 .2 Diversity measures 50 20 Diversity 40 .4 .6 Evenness Diversity 100 150 60 Evenness measures 14 16 Shannon Diversity (m2) Shannon Evenness (m2) (b) Cuisine Measure 2 Empirics 4.1 City level estimation The model in the theory section showed how demand aggregation affects variety when cities are identical in characteristics. To incorporate differences in the characteristics of cities I assume the population of a market S Nm can be completely partitioned into a set of groups S: Nm = ∑ Nms. These groups could be defined by s=1 demographic characteristics, such as ethnicity, income, or education, and group specific affinities for cuisines implies their relative size could affect a city’s variety: ! S Lm L∗ Nms ∗ ∗ 1 − ∗ 1(Lm ≤ L ) + 1(L < Lm ) (18) #Varietiesm ∼ Nm ∑ 2L 2Lm s=1 Nm To estimate the above equation I take logs and replacing the log of the percentage sub-groups ( NNms ) with the m vector Xm of demographic percentages and population characteristics (ex: median income, percent college educated) shown in Table 1. With summary level data I cannot separate individuals into mutually exclusive groups and so I let each characteristic have its own coefficient. After taking logs and simplifying there are two terms with land area: ln(2L∗ − Lm )1(Lm ≤ L∗ ) and −ln(Lm )1(L∗ < Lm ). The form of the first term is dependent upon functional form assumptions from the model, such as linear transporation cost. However, the prediction of a negative effect of log land area, and one that increases in magnitude with larger values of land, is a more general finding and would also hold, for example, under an assumption of quadratic transportation costs. To capture this I replace the complicated kinked function with the log of land area, ln(Lm ), and estimate regressions by land quartile to allow the coefficients to vary with land area33 . These simplifications lead to a straight-forward log linear specification: ln(#Cuisinesm ) = γ0 + γ1 ln(Nm ) + γ2 ln(Lm ) + Xm 0β + εm (19) kink point L∗ is a general feature of this model under different assumptions. I discuss the difficulties of estimating this parameter later in the paper. 33 The 19 In equation 19 the m subscripts stand for market (city), N is population with γ1 predicted to be positive, L is land with γ2 predicted to be negative, and X is the vector of covariates shown in summary Table 1. In addition, I include 45 ethnicity control variables, calculated as the percentage of the city’s population born in a given country (ex: percentage Argentine) from the 2000 US Census. The coefficients on demographic characteristics are not cuisine specific and in the context of the theory could be interpreted as averages of the affinities across cuisines. In Table 2 I run this specification separately by land quartile, pooled, and for both cuisine measures. In order to allow for the possibility that residents of a given city travel to other cities within the same Metropolitan Statistical Area (MSA) I include MSA fixed effects and cluster at the MSA level. Running the quartile specifications without fixed effects leads to very similar coefficients and smaller standard errors. The first two columns of each panel of Table 2 compare the pooled specifications with and without MSA fixed effects, yielding little difference. In the pooled specifications I find that a 10% increase in population leads to a 4% increase in the count of cuisines (measure 1) and a 5% increase in the count of cuisine-price pairs (measure 2). I also find that cities with a larger percentage of college graduates and cities with a lower average household size have a greater number of cuisines (perhaps reflecting economies of scale in food preparation or disutility from taking young children to restaurants). The coefficient on land area is insignificant for both pooled specifications. In the land quartile specifications I find that the coefficient on population roughly increases with each land quartile. Further, the coefficient on land area declines over the quartiles until reaching the last quartile where it becomes negative and statistically significant for both cuisine measures. The magnitude of these coefficients is fairly large, indicating that a 10% decrease in land area, which effectively increases density without changing population, increases the number of cuisines by 2.2% and 2%. I also look at the diversity within a cuisine and find similar results. I define within cuisine diversity as the number of price-cuisine pairs, or subcuisines, within any given cuisine; the number of subcuisines can range from 1 to 5. I then estimate the following specification: #SubCuisinesmv = γ0 + γ1 ln(Nm ) + γ2 ln(Lm ) + γ3 ethmv + Xm 0β + εmv (20) The unit of observation is the city-cuisine pair (mv) and for any given cuisine I only include cities with at least one restaurant in the cuisine (no zeros), and cluster at the city level. This makes the specification similar to running a regression on the number of subcuisines, demeaned at the cuisine level, and then aggregated back up to the city level. However, in two of the specifications I also include the ethnic percentage of the city corresponding to the cuisine, which varies at the city-cuisine level. For these specifications I can only estimate across ethnic cuisines, which reduces the sample. I present the results in Table 3 with and without MSA fixed effects. Focusing on column 2, which is run for all cuisines, population increases the number of subcuisines; a 10% increase in population leads to about a .042 increase in the number of subcuisines within any cuisine. This is about 8% of the standard deviation of the number of subcuisines within the average cuisine. Land area has the expected negative effect and again is much smaller in magnitude than the coefficient on population. When restricting the sample to ethnic cuisines I find larger results on both population and land area. An interpretation of these results is that bigger, denser cities are associated with greater within cuisine diversity for all cuisines and with a stronger effect for ethnic cuisines. 4.2 Cuisine level estimation The theory suggests that for any variety, regardless of tastes, markets with greater populations and smaller land areas aggregate consumers and are thus more likely to support that variety. Continuing with Cmv as an 20 Table 2: Number of Cuisines: Measure 1 and Measure 2 (a) Cuisine Measure 1 (1) All 0.399*** (0.034) (2) All fe 0.397*** (0.038) (3) LQ4 0.220** (0.098) (4) LQ3 0.383*** (0.088) (5) LQ2 0.495*** (0.118) (6) LQ1 0.511*** (0.045) 0.010 (0.033) 0.019 (0.039) 0.206 (0.137) -0.066 (0.161) -0.041 (0.174) -0.229*** (0.056) -0.593*** (0.098) -0.586*** (0.105) -0.946*** (0.280) -0.523 (0.316) -0.102 (0.279) -0.648* (0.338) Med. HH Income (000’s) 0.004* (0.002) 0.002 (0.002) 0.011 (0.007) -0.005 (0.006) -0.007 (0.009) -0.000 (0.008) %Old (> 64) -0.184 (0.635) -0.384 (0.791) -0.556 (1.679) -0.671 (1.463) -0.681 (1.533) -1.750 (2.095) %Young (< 35) 0.144 (0.510) -0.433 (0.503) 0.766 (1.173) -1.576 (1.179) -1.691 (1.119) -1.228 (1.355) %College grad 0.565** (0.230) 703 0.818 NO 0.726*** (0.249) 703 0.854 YES 0.221 (0.844) 177 0.853 YES 1.540** (0.750) 172 0.922 YES 1.068 (0.745) 175 0.894 YES 0.860 (0.690) 179 0.948 YES Pop 2007-8 (logs) Land sq mtrs (logs) Average HH Size Observations R2 MSA FE (b) Cuisine Measure 2 (1) All 0.521*** (0.033) (2) All fe 0.525*** (0.036) (3) LQ4 0.336*** (0.112) (4) LQ3 0.461*** (0.118) (5) LQ2 0.605*** (0.136) (6) LQ1 0.626*** (0.053) 0.018 (0.032) 0.020 (0.038) 0.226* (0.132) -0.092 (0.191) -0.093 (0.241) -0.200*** (0.073) -0.769*** (0.117) -0.761*** (0.123) -1.040*** (0.274) -0.727* (0.415) -0.340 (0.342) -0.645* (0.379) Med. HH Income (000’s) 0.006** (0.003) 0.003 (0.003) 0.013* (0.007) -0.004 (0.007) -0.006 (0.012) -0.007 (0.009) %Old (> 64) -0.658 (0.782) -0.726 (1.016) -1.277 (1.782) -1.304 (1.411) -1.294 (2.006) -2.414 (2.749) %Young (< 35) 0.232 (0.604) -0.428 (0.628) 0.624 (1.465) -1.988 (1.210) -1.002 (1.327) -1.984 (1.945) 0.567** 0.698*** 0.195 1.299 1.131 (0.252) (0.263) (0.865) (0.873) (0.917) Observations 703 703 177 172 175 R2 0.853 0.883 0.871 0.928 0.892 MSA FE NO YES YES YES YES Standard errors in parentheses, clustered at MSA level. * p<0.1 ** p<0.05 *** p<0.01 Each regression is run with 45 ethnicity control variables which match cuisine varieties. Note: 23 Census Places are not in MSAs and were dropped from estimation. 1.404* (0.739) 179 0.954 YES Pop 2007-8 (logs) Land sq mtrs (logs) Average HH Size %College grad 21 Table 3: Diversity Within Cuisines: Number Subcuisines (1) (2) (3) (4) All All FE Ethnic Ethnic FE Pop 2007-8 (logs) 0.422*** 0.423*** 0.550*** 0.541*** (0.037) (0.038) (0.051) (0.051) Land sq mtrs (logs) -0.086*** (0.029) -0.070** (0.032) -0.158*** (0.040) -0.120*** (0.042) Average HH Size -0.359*** (0.059) -0.397*** (0.069) -0.432*** (0.085) -0.454*** (0.099) 0.000 (0.002) -0.000 (0.002) 0.000 (0.002) -0.001 (0.003) -1.031** (0.491) -0.934* (0.493) -1.516** (0.683) -1.258* (0.681) %Young (< 35) -0.421 (0.422) -0.616 (0.459) -0.767 (0.597) -0.996 (0.646) %College grad 0.415*** (0.142) 0.412*** (0.155) 0.756*** (0.224) 0.822*** (0.233) 12967 0.435 YES 0.098 (0.183) 5790 0.452 NO 0.185 (0.182) 5713 0.480 YES Med. HH Income (000’s) %Old (> 64) Corresponding ethnic % Observations R2 MSA FE 13168 0.418 NO A subcuisine is a cuisine-price pair within a cuisine, such as Indian price 2. Standard errors in parentheses, clustered at Census Place level. * p<0.1 ** p<0.05 *** p<0.01 Unit of observation is cuisine-city pair. All specifications include cuisine fixed effects. 22 indicator I write: Cmv = 1 if Nm 0 o/w S Nms ∑ Nm s=1 ! h 1− Lm 2L∗ L∗ 1(L∗ 1(Lm ≤ L∗ ) + 2L m i < Lm ) ≥ N ∗ (21) An interesting feature of the model is that the kink point L∗ is independent of the variety and the demographic characteristics of the population. This kink point exists because until the firm can reach the desired geographic market extent, the density adjusts with the land area in a way dependent upon transportation cost. When the market’s land area is larger than L∗ the firm is able to operate at its preferred geographic extent (L∗ /2 on either side) and thus only needs the market to be above a constant density so that it can always sell to the same number of consumers within this distance. In this way the kink point is a very general feature of these models and implies that different assumptions about transportation cost will still lead to land area having a larger negative effect for geographically bigger markets34 . For this reason it would be informative to estimate the kink point directly and let the coefficient on ln(Lm ) vary depending on whether Lm ≤ L∗ , making L∗ an unknown structural break. However, the data is too sparse in that many geographically small markets lack many cuisines, and thus a cut-off value in land area perfectly predicts the absence of that cuisine. Therefore I once again run my estimates with just one term for land area and estimate the following log-linearized specification: Pr(Cmv = 1) = Pr(Π∗mv > 0) Π∗mv = γ1 ln(Nm ) + γ2 ln(Lm ) + Xm 0β + ηv + εmv I first estimate a pooled specification of the above across all cuisines, breaking out results by land quartile, and including cuisine fixed effects, a constant, and clustering standard errors at the city (place) level. The number of observations will be greater for larger land quartiles since cities in these quartiles have a greater number of cuisines. The estimates in the top panel of Table 4 show that across all cuisines the likelihood of a city having a given cuisine is increasing in population and decreasing in land area. Looking at the estimates by land quartile, we again see that most of the effect of land comes from the largest cities. The bottom panel includes ethnicity controls and decreases the samples since non-ethnic cuisines (e.g., “Desserts”) have no corresponding ethnicity. Increasing the percentage of the population of a given ethnicity significantly raises the likelihood of that city having the corresponding cuisine but doesn’t much change the effects of the other factors. I now estimate the above specification for each cuisine separately, including all the previous covariates except for the age variables, which I found to be insignificant. Again, I throw out the results for cuisines not passing the likelihood ratio test, leaving 86 of the 90 cuisines. The estimation results are listed in the Appendix in Table 11. Generally the coefficients reflect the signs from the pooled specification in Table 4 but with larger standard errors (the sample size is much smaller). All of the coefficients on population are positive and significant at the 5% level. The coefficient on land is negative for 65 of the 86 cuisines with 27 of these significant at the 10% level. The variable “average household size” tends to decrease the likelihood of having a cuisine while percent college educated and percent of the corresponding ethnicity raise the likelihood. In Table 5 I show classification results for the full model versus a logit model with S 34 In the quadratic case variety v is found in market m if N m L∗ = q 4 3τ (u1 − u0 − c) Nms ∑ Nm s=1 ! i h 2 Lm 3L∗ ∗ ∗ ∗ 1 − 3L ∗2 1(Lm ≤ L ) + 2Lm 1(L < Lm ) ≥ N , where and N ∗ , which by definition does not depend upon transportation cost, is the same (N ∗ = 23 F u1 −u0 −c ). Table 4: Likelihood of Having a Given Cuisine (a) All Cuisines (1) All 0.101*** (0.003) (2) LQ4 0.087*** (0.010) (3) LQ3 0.113*** (0.008) (4) LQ2 0.140*** (0.008) (5) LQ1 0.139*** (0.006) Land sq mtrs (logs) -0.019*** (0.003) 0.022* (0.013) -0.011 (0.026) -0.018 (0.023) -0.045*** (0.007) Average HH Size -0.057*** (0.011) -0.055*** (0.021) -0.042** (0.021) -0.075*** (0.026) -0.097*** (0.033) Med. HH Income (000’s) 0.000 (0.000) -0.000 (0.001) 0.000 (0.001) -0.000 (0.001) -0.001 (0.001) %Old (> 64) -0.052 (0.091) 0.033 (0.179) 0.047 (0.188) -0.018 (0.218) -0.327 (0.284) %Young (< 35) -0.071 (0.072) 0.084 (0.177) -0.178 (0.137) -0.049 (0.187) -0.128 (0.177) %College grad 0.164*** (0.026) 65340 .59 90 0.207*** (0.052) 11946 .45 66 0.178*** (0.054) 12558 .52 69 0.251*** (0.064) 12670 .55 70 0.253*** (0.073) 16380 .63 90 Pop 2007-8 (logs) Observations Pseudo R-squared Number of cuisines (b) Ethnic Cuisines Only (1) All 0.082*** (0.003) (2) LQ4 0.084*** (0.009) (3) LQ3 0.101*** (0.007) (4) LQ2 0.123*** (0.008) (5) LQ1 0.122*** (0.005) Land sq mtrs (logs) -0.021*** (0.003) 0.016 (0.013) -0.031 (0.021) -0.013 (0.023) -0.038*** (0.007) Average HH Size -0.040*** (0.009) -0.047** (0.020) -0.029* (0.017) -0.059** (0.026) -0.077*** (0.029) Med. HH Income (000’s) -0.000 (0.000) -0.000 (0.001) -0.000 (0.000) -0.000 (0.001) -0.001 (0.001) %Old (> 64) 0.017 (0.072) 0.028 (0.145) 0.064 (0.158) 0.135 (0.210) -0.021 (0.264) %Young (< 35) -0.038 (0.055) 0.048 (0.142) -0.109 (0.108) 0.040 (0.173) -0.024 (0.171) %College grad 0.165*** (0.021) 0.189*** (0.053) 0.174*** (0.045) 0.268*** (0.063) 0.277*** (0.066) Pop 2007-8 (logs) %Corresponding ethnicity 0.192*** 0.205*** 0.234*** 0.233*** 0.394*** (0.020) (0.046) (0.045) (0.044) (0.082) Observations 42834 6697 7462 7240 10738 Pseudo R-squared .62 .48 .55 .58 .65 Number Cuisines 59 37 41 40 59 Dependent variable is cuisine-city indicator, marginal effects of coefficients shown. All specifications run with cuisine fixed effects.24 Standard errors in parentheses, clustered at Census Place level. * p<0.1 ** p<0.05 *** p<0.01 Table 5: Full Model Classification Table Predicted 0 Actual 1 Cons Only Full Cons Only Full 0 46,136 47,095 5,410 3,161 94% 96% 41% 24% 1 3,103 2,144 7,787 10,036 6% 4% 59% 76% Total 49,239 49,239 13,197 13,197 just a constant. There are 86 cuisines and 726 cities resulting in 62, 436 cuisine-city pairs. The rows of the table show the actual count of cities with a cuisine (1 if yes) while the columns show the predictions of the constant-only model and the full model. We can see that because most observations are zero, meaning most cities are missing most cuisines, the overall classification rate is high for both models: 86.4% for the model with just a constant and 91.5% for the full model. However, there is a large difference in the number of correctly predicted successes, meaning the full model does a much better job in correctly predicting whether a city has a cuisine (76% to 59%). In order to better interpret the results of the estimation I now do a counterfactual exercise to see the aggregate effect–across all cuisines–of individual city characteristics on product variety. I will focus on the main demand aggregation variables–population, land, and ethnicity–and use percent college educated for comparison35 . I first use the model to predict whether each of the 726 cities has each of the 86 cuisines. Next I calculate the standard deviation of each explanatory variable over all cities, calculating standard deviation separately for each ethnicity36 . For each explanatory variable I again predict all city-cuisine pairs after increasing the variable by one standard deviation, or in the case of log land, decreasing by a standard deviation. The results, shown in aggregate in Table 6 and by cuisine in Table 7, yield a fairly clear interpretation. Population is the most important factor in determining city product variety but the effects vary greatly by land quartile. For the quartile 4 cities, a one standard deviation increase in city population increases the average count of cuisines by 145% while the same increase leads to 57% more cuisines for quartile 1 cities. Further, for smaller cities over half of this increase comes from new non-ethnic cuisines while in the top two quartiles the increase is larger in ethnic cuisines. A one standard deviation decrease in log land area, which increases density without changing the population, has a fairly large effect at the top quartile comparable to increasing the percent of the population with a college education by one standard deviation. The size of this effect decreases with each land quartile and nearly drops to zero for quartile 4. Table 7 shows that for some cuisines, including both “American” cuisines, “Barbecue,” “Coffee Shops & Diners,” “Desserts,” “Mexican,” “Seafood,” and “Steakhouse”–decreasing land area leads to fewer cities having this type of food. These are some of the most common cuisines and thus make up a significant portion of the variety of small cities. Mechanically, since the estimation predicts that decreasing land decreases the likelihood of having these cuisines, small cities can end up with fewer cuisines overall. Many of these small cities have a population below the minimum population required for many cuisines, given the cities’ demographic characteristics, 35 Decreasing average household size by one standard deviation also had a significant effect, slightly larger than the effect for percent college educated. To save space these results are omitted but results for all variables are available by request. 36 I use standard deviation, rather than a uniform percentage change, because I am interested in the magnitude of the effect of each variable within the range of variation actually observed across cities. If I were to increase each variable by 10% this would represent a fairly tiny change in population given the variance across cities but an absolutely enormous change in the percentage of the population of a given ethnicity; for most ethnicities it would increase the ethnic percentage far beyond the maximum observed value in my data. Finally, note that increasing or decreasing a variable in logs by a fixed amount is equivalent to applying a percentage change to the variable. 25 Table 6: Predicted Change in Cuisine Count ΔPopulation ΔLand ΔCollege ΔEthnic Land Quartile Cuisine Type Baseline Count Change in cuisine count Change in cuisine count Change in cuisine count Change in cuisine count Non‐ethnic 15.60 6.03 39% 0.91 6% 1.10 7% 0.00 0% 1 Ethnic 12.69 10.18 80% 1.84 15% 1.77 14% 1.67 13% Total 28.30 16.20 57% 2.75 10% 2.87 10% 1.67 6% Non‐ethnic 10.82 6.04 56% 0.56 5% 0.70 6% 0.00 0% 2 Ethnic 7.18 7.05 98% 0.75 10% 0.99 14% 1.56 22% Total 18.01 13.09 73% 1.31 7% 1.69 9% 1.56 9% Non‐ethnic 7.41 6.48 87% 0.06 1% 0.62 8% 0.00 0% 3 Ethnic 5.34 5.41 101% 0.35 7% 0.72 13% 1.25 23% Total 12.75 11.90 93% 0.41 3% 1.34 10% 1.25 10% Non‐ethnic 4.49 6.93 154% 0.22 5% 0.57 13% 0.00 0% 4 Ethnic 3.52 4.68 133% 0.00 0% 0.59 17% 1.24 35% Total 8.01 11.61 145% 0.22 3% 1.16 14% 1.24 15% *Table shows average change in count of cuisines resulting from a one standard deviation decrease in log land area and a one standard deviation increase in every other variable. Percent change is calculated as percent of baseline count. and thus decreasing land area should not increase their likelihood of having those cuisines. It may also be that for cities of that size transportation costs are already quite low. To be clear, this suggests land area should have no effect, not a negative effect, and there is nothing in the model that would predict a decrease in land area leads to a decrease in the likelihood of having a cuisine. However, these are relatively few cuisines in comparison to the majority and the general effect is negative, as seen in the coefficient on land area found in Table 4. Finally, increasing the percentage of the population from each ethnicity has a positive and significant effect on the count of ethnic cuisines in a city. As with population, this effect is largest, in percent terms, for the smallest cities. Taken all together Table 6 suggests that for small cities, product variety is low mainly due to population size, with low ethnic diversity leading to few ethnic cuisines. Increasing population density, while maintaining population size, does not lead to greater product variety because these small cities just don’t have enough people at any geographic aggregation. As cities get larger population alone becomes less important and the distribution of people in space begins to affect which varieties are available; a city may have sufficient demand for a given cuisine but that demand must be concentrated. 4.3 Identification issues and clustering of ethnic populations Estimating the effect of population concentration on product variety shares identification issues with the problem of estimating the effect of population concentration on wages and much of the following discussion is informed by Combes, Duranton, and Gobillon (2011), or CDG. One potential concern is reverse causality: perhaps restaurant diversity, or another factor correlated with restaurant diversity, actually increases population concentration (the “endogenous quantity of labor” problem in CDG). A different way of viewing this problem is that conditional on population size, some of the factors that increase density may also affect restaurant diversity. For example, a city with pro-density zoning laws and land use constraints may also have a culture favorable to restaurant diversity. To address this problem, I use several variables that can predict smaller land areas conditional on current population—predict greater density—but that may not be associated with present-day factors affecting restaurant diversity. For the first instrument I follow Abel, Dey, and Gabe (2012) who used the population 26 Table 7: Predicted Change in City Count, by Cuisine Cuisine Afghan African American (New) American (Traditional) Argentinean Armenian Asian Austrian Bakeries Barbecue Belgian Brazilian Burmese Cajun & Creole Californian Cambodian Caribbean Central European Chilean Chinese Coffee Shops & Diners Colombian Cuban Deli Desserts Dim Sum Eastern European Eclectic & International Egyptian English Ethiopian Filipino French German Greek Hamburgers Health Food Hot Dogs Hungarian Indian Indonesian Irish Italian Jamaican Japanese Korean Kosher Lebanese Malaysian Mediterranean Meat‐and‐Three Mexican Middle Eastern Moroccan Noodle Shop Latin American Pizza Polish & Czech Polynesian Portuguese Puerto Rican Russian Scandinavian Seafood Soups South American Southern & Soul Southwestern Spanish Steakhouse Sushi Swiss Tapas / Small Plates Thai Tibetan Turkish Vegan Vegetarian Venezuelan Vietnamese Fast Food Coffeehouse Pan‐Asian & Pacific Rim Family Fare Cheesesteak Chowder Ice Cream Bagels Donuts Juices & Smoothies ΔPopulation ΔLand ΔCollege ΔEthnic Original Count of Cities Change in city count Change in city count Change in city count Change in city count LQ4 LQ3 LQ2 LQ1 Sum LQ4 LQ3 LQ2 LQ1 Sum LQ4 LQ3 LQ2 LQ1 Sum LQ4 LQ3 LQ2 LQ1 Sum LQ4 LQ3 LQ2 LQ1 Sum 2 2 4 9 17 4 4 7 27 42 1 3 1 6 11 0 2 0 2 4 0 2 0 0 2 1 2 4 20 27 3 4 5 50 62 0 1 0 8 9 0 1 0 17 18 0 0 0 1 1 21 45 68 119 253 36 79 100 39 254 0 ‐2 0 ‐1 ‐3 3 8 10 7 28 ‐1 ‐3 ‐1 ‐2 ‐7 91 128 153 173 545 89 36 6 3 134 ‐16 ‐12 ‐4 ‐1 ‐33 ‐8 ‐6 ‐3 0 ‐17 ‐3 ‐3 ‐1 0 ‐7 1 1 1 10 13 2 3 0 21 26 0 1 0 3 4 1 1 0 3 5 0 0 0 0 0 Not Estimated 41 63 90 128 322 83 96 83 29 291 5 6 15 6 32 ‐1 ‐15 ‐14 ‐13 ‐43 14 13 25 11 63 Not Estimated 57 83 112 152 404 121 77 44 17 259 18 13 18 5 54 5 4 8 1 18 0 0 0 0 0 65 121 151 170 507 89 35 2 0 126 ‐38 ‐74 ‐19 ‐2 ‐133 58 30 2 0 90 0 0 0 0 0 0 0 0 7 7 1 2 4 30 37 0 0 0 ‐4 ‐4 0 0 0 ‐5 ‐5 0 0 0 5 5 4 1 8 21 34 4 4 20 60 88 0 1 0 9 10 1 2 1 16 20 0 1 0 5 6 0 1 1 2 4 0 2 0 2 4 0 1 0 2 3 0 0 0 0 0 0 0 0 0 0 6 31 30 81 148 13 45 81 79 218 0 0 9 10 19 0 2 21 24 47 0 0 0 0 0 13 19 32 70 134 21 36 78 75 210 2 4 11 8 25 2 4 12 8 26 0 0 0 0 0 0 1 0 4 5 5 5 3 29 42 2 3 1 10 16 1 0 0 6 7 0 0 0 1 1 6 14 17 59 96 8 12 33 57 110 0 1 1 2 4 0 2 1 6 9 1 2 2 9 14 0 0 2 5 7 5 4 7 20 36 0 0 0 0 0 0 0 ‐1 0 ‐1 0 1 2 0 3 0 0 0 3 3 0 0 0 8 8 0 0 0 ‐1 ‐1 0 0 1 10 11 0 0 0 1 1 148 169 175 178 670 12 1 0 0 13 1 0 0 0 1 4 1 0 0 5 11 1 0 0 12 42 72 106 153 373 95 103 47 14 259 ‐7 ‐17 ‐22 ‐2 ‐48 2 3 10 6 21 0 0 0 0 0 0 0 1 9 10 1 3 2 28 34 0 0 0 5 5 0 0 0 3 3 0 0 0 0 0 4 2 7 30 43 13 19 41 82 155 2 3 4 26 35 1 0 0 4 5 1 1 2 10 14 119 147 163 171 600 35 13 3 2 53 0 0 0 0 0 6 1 0 0 7 0 0 0 0 0 76 107 137 162 482 118 60 13 3 194 ‐8 ‐9 ‐3 ‐2 ‐22 ‐7 ‐9 ‐3 ‐2 ‐21 0 0 0 0 0 1 0 1 2 4 0 2 0 2 4 0 0 0 1 1 0 2 0 1 3 0 0 0 0 0 4 4 0 13 21 6 6 8 48 68 3 4 1 15 23 0 2 0 0 2 0 1 0 0 1 14 21 40 80 155 23 49 87 75 234 2 2 12 16 32 1 2 10 11 24 0 0 0 0 0 Not Estimated 3 5 5 24 37 9 10 27 67 113 0 1 1 17 19 ‐1 0 ‐1 ‐4 ‐6 0 1 0 2 3 2 1 0 11 14 4 3 3 33 43 0 1 0 8 9 0 1 0 10 11 0 0 0 1 1 1 1 1 6 9 4 2 11 26 43 1 0 1 5 7 0 ‐1 0 ‐2 ‐3 1 0 0 1 2 32 52 77 111 272 38 70 82 43 233 1 3 6 2 12 12 33 46 29 120 3 11 23 13 50 4 6 17 58 85 2 3 23 53 81 0 0 0 2 2 0 0 0 ‐5 ‐5 0 0 3 4 7 17 43 53 114 227 45 75 95 55 270 3 5 10 7 25 3 9 17 16 45 3 9 17 16 45 30 51 73 126 280 79 97 86 36 298 4 14 23 14 55 0 2 2 0 4 0 0 0 0 0 3 5 6 54 68 1 3 11 42 57 0 0 ‐1 ‐2 ‐3 0 3 2 21 26 0 0 0 0 0 3 8 12 32 55 1 4 4 46 55 0 0 0 6 6 0 1 0 8 9 0 0 0 0 0 0 0 1 3 4 0 0 1 7 8 0 0 0 0 0 0 0 0 1 1 0 0 0 1 1 21 39 56 106 222 36 79 93 54 262 2 6 18 13 39 6 15 27 23 71 5 14 27 17 63 0 0 0 10 10 3 5 15 45 68 0 0 1 5 6 0 0 0 ‐4 ‐4 0 0 1 5 6 6 8 17 39 70 3 4 16 46 69 0 1 0 5 6 0 1 0 8 9 0 0 0 ‐2 ‐2 91 120 147 170 528 88 51 17 4 160 14 12 7 0 33 23 23 8 1 55 16 15 8 1 40 0 1 0 6 7 0 3 0 17 20 0 0 0 0 0 0 1 0 8 9 0 0 0 0 0 59 82 118 148 407 74 71 47 12 204 2 2 3 0 7 10 19 22 3 54 72 71 47 12 202 10 15 21 62 108 14 29 54 77 174 0 3 5 13 21 0 3 5 13 21 0 4 7 15 26 3 0 3 15 21 5 8 16 55 84 1 0 1 21 23 0 0 0 ‐1 ‐1 0 0 0 0 0 1 2 2 18 23 1 1 2 21 25 0 0 0 0 0 0 0 0 4 4 1 2 3 35 41 0 3 3 8 14 7 15 19 51 92 1 5 3 12 21 0 1 0 4 5 0 0 0 3 3 10 7 20 52 89 16 27 58 73 174 1 1 10 18 30 4 3 16 24 47 0 0 0 ‐5 ‐5 0 0 0 4 4 0 0 0 1 1 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 123 153 174 179 629 25 0 0 0 25 ‐76 ‐33 ‐4 0 ‐113 28 1 0 0 29 39 1 0 0 40 8 16 21 70 115 18 44 87 79 228 7 2 7 14 30 6 2 4 12 24 7 2 7 12 28 1 0 0 9 10 3 0 4 26 33 1 0 0 3 4 0 0 0 ‐2 ‐2 1 0 0 4 5 5 6 7 21 39 4 5 11 29 49 1 0 0 5 6 1 2 4 10 17 1 2 4 9 16 3 5 5 31 44 4 2 18 51 75 0 0 0 3 3 0 1 2 21 24 0 0 1 6 7 164 178 178 180 700 2 0 0 0 2 0 0 0 0 0 ‐13 ‐3 ‐2 ‐2 ‐20 0 0 0 0 0 0 0 1 3 4 0 0 0 3 3 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 0 3 0 6 9 0 1 0 8 9 0 0 0 2 2 0 0 0 0 0 0 0 0 0 0 0 1 0 3 4 5 3 2 23 33 1 2 0 11 14 0 1 0 3 4 0 1 0 1 2 Not Estimated 0 0 0 5 5 1 0 0 18 19 0 0 0 ‐1 ‐1 0 0 0 1 1 0 0 0 2 2 0 0 2 2 4 0 0 0 6 6 0 0 0 1 1 0 0 0 ‐1 ‐1 0 0 0 0 0 64 104 119 161 448 119 81 20 6 226 ‐8 ‐18 ‐8 ‐3 ‐37 6 13 2 1 22 0 0 0 0 0 27 52 74 107 260 90 103 108 42 343 6 17 33 14 70 2 6 12 3 23 0 0 0 0 0 1 2 2 17 22 2 4 4 46 56 0 0 0 3 3 0 0 0 3 3 0 0 0 1 1 4 4 8 67 83 2 10 35 70 117 0 1 1 6 8 0 1 1 6 8 0 0 0 0 0 3 3 6 33 45 0 2 1 23 26 0 0 0 ‐13 ‐13 0 0 1 15 16 0 0 0 0 0 2 7 12 37 58 14 13 39 68 134 2 1 4 27 34 0 1 2 8 11 0 1 2 10 13 35 59 79 147 320 29 85 73 17 204 ‐1 ‐11 ‐52 ‐19 ‐83 ‐1 ‐5 ‐29 ‐6 ‐41 0 0 0 0 0 6 9 11 47 73 11 8 36 58 113 2 0 2 18 22 3 0 10 27 40 0 0 0 0 0 0 0 0 9 9 0 0 0 3 3 0 0 0 ‐1 ‐1 0 0 0 0 0 0 0 0 0 0 2 1 5 24 32 4 4 18 66 92 0 1 0 12 13 0 0 0 3 3 0 0 0 0 0 47 72 91 130 340 103 90 67 32 292 33 31 25 13 102 6 6 8 5 25 25 25 20 12 82 0 1 0 2 3 0 0 1 1 2 0 0 0 0 0 0 2 1 2 5 0 0 0 1 1 0 0 0 7 7 0 0 1 17 18 0 0 0 ‐3 ‐3 0 0 1 12 13 0 0 0 0 0 3 3 1 22 29 6 3 17 51 77 1 1 2 11 15 2 2 2 17 23 0 0 0 0 0 12 16 31 73 132 27 59 88 83 257 3 5 19 27 54 7 15 29 38 89 0 0 0 0 0 0 0 0 4 4 0 0 0 9 9 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 12 26 35 87 160 18 46 66 68 198 0 5 6 13 24 1 7 9 18 35 26 53 81 73 233 160 168 178 178 684 0 0 0 0 0 0 0 0 0 0 ‐1 ‐3 0 0 ‐4 0 0 0 0 0 54 81 115 143 393 99 76 49 22 246 22 29 18 10 79 15 24 15 7 61 0 0 0 0 0 9 11 14 39 73 23 39 58 88 208 6 6 12 34 58 2 0 3 16 21 1 0 2 12 15 46 67 100 127 340 129 105 74 23 331 20 29 34 6 89 0 ‐6 ‐6 ‐9 ‐21 0 0 0 0 0 3 2 1 13 19 0 0 1 13 14 0 0 0 0 0 0 0 0 ‐1 ‐1 0 0 0 0 0 0 0 2 4 6 3 4 4 15 26 0 1 0 3 4 0 1 0 3 4 0 0 0 0 0 58 87 118 154 417 116 73 41 17 247 20 19 16 5 60 14 18 13 4 49 0 0 0 0 0 12 11 32 65 120 20 23 54 66 163 2 4 8 8 22 6 6 24 28 64 0 0 0 0 0 9 5 10 37 61 2 7 9 62 80 0 0 0 10 10 0 0 0 10 10 0 0 0 0 0 2 9 12 35 58 5 15 30 76 126 0 0 1 16 17 0 0 0 7 7 0 0 0 0 0 27 of the city’s county in the year 1900 as an instrument for current log density (their specification does not include population and land separately)37 . While the authors justified this instrument under the assumption that there is a persistence in population that is unrelated to current productivity, I am instrumenting for land area conditional on population under the assumption that the persistence in population results in cities with exogenously higher density today. The argument is thus slightly different: cities in areas with historically larger populations would have developed in an era of earlier transportation technology and thus be denser today due to a persistence in city layout and structure. As an additional instrument I include the share of unavailable land in the principal city of each MSA from Saiz (2010)38 . The share of unavailable land is based exclusively on measures of geography (presence of water bodies, slope of land) and thus cities in areas with less developable land may be naturally constrained to higher densities. I estimate the earlier specification from Table 2 using these instruments and show the results in Table 8. The variation in my instruments is mostly at the MSA level and so I do not include MSA fixed effects but do cluster at this level. I also do not have enough variation to include the earlier 45 ethnicity control variables so I instead proxy for ethnic diversity with ethnic HHI, calculated as the sum of squared ethnicity shares. The first column of Table 8 re-estimates the OLS specification across all quartiles with these variable changes and is fairly similar to earlier. In column 2 I instrument for land area with the county population in 1900 and find a similar effect of population and again no effect of land area. In the remaining four columns I focus just on the largest land quartile where I had found land area had a significant negative effect in earlier estimates. Comparing the OLS estimate of this quartile (column 3) to the historic population IV estimate I find larger coefficients on population and land area but with a significantly larger standard error on land area. Further, comparing the Kleibergen-Paap statistic (for clustered errors) to the Stock and Yogo critical values suggests the instrument is weak. I therefore include the p-value from the Anderson Rubin test, which has correct size in the presence of weak instruments, and reject that the coefficient on log land area is zero for this and all IV specifications. In column 5 I instrument with the share of unavailable land, which is a stronger instrument, and leads to even larger coefficients on population and land area. In specification 6 I use both instruments and find a coefficient between the two earlier IV estimates. Clearly the results are quite sensitive to the choice of instrument but all specifications show a large and significant negative effect of land area. This provides further evidence that density–controlling for scale (population)–can have an important effect on product variety. An additional and separate endogeneity problem arises if particular groups of people associated with restaurant diversity sort into large, dense cities (this is somewhat similar to the “endogenous quality of labor” problem in CDG). For example, if producers of cuisine v tend to live in large, dense cities for reasons unrelated to demand for cuisine v—new immigrants may be skilled restaurateurs and feel more comfortable in large cities—then this would generate a spurious relationship between population, land, and product variety. Another example would be if people with a particularly strong taste for variety–gourmands–prefer to live in big dense cities and thus the restaurant variety is being driven by a small subset of the population. Ideally, with a dataset on restaurateurs I could compare similar producers of cuisine v in different cities, or the same restaurateur living in different cities over time, and show that a producer of cuisine v only creates a restaurant of cuisine v when demand in their current city is sufficiently aggregated. Since I don’t have this data, I will proxy for the presence of both producers and consumers of cuisine v with the population of 37 I match Census Places to counties and obtained historical population data from the National Historical Geographic Information System (NHGIS 2011). 38 Saiz calculates his measure for principal cities of MSAs with gerater than 500,000 people and thus the data is at the PMSA, MSA, or NECMA level. I first match Census Places to PMSAs and then for Census Places I cannot match directly to a PMSA I assign the value of the PMSA for the shared MSA. For example, Anaheim, CA cannot be matched directly to a PMSA in the Saiz data so I assign it the value of the Los Angeles PMSA since both Anaheim and Los Angeles are in the LA-Riverside MSA. For this work the MableCORR system was very helpful (MableGeocorr 2010). 28 Table 8: Instrumented Specifications (1) OLS 0.403*** (0.036) (2) IV 0.433*** (0.093) (3) OLS LQ1 0.478*** (0.041) (4) IV LQ1 0.532*** (0.103) (5) IV LQ1 0.629*** (0.084) (6) IV LQ1 0.606*** (0.079) 0.006 (0.035) -0.025 (0.095) -0.179*** (0.038) -0.266* (0.154) -0.434*** (0.127) -0.384*** (0.112) -0.492*** (0.095) -0.484*** (0.100) -0.430** (0.200) -0.394* (0.202) -0.458** (0.198) -0.335** (0.169) 0.004* (0.002) 0.004* (0.002) 0.002 (0.004) 0.001 (0.004) -0.000 (0.004) -0.000 (0.004) -0.886*** (0.113) -0.822*** (0.231) -0.278 (0.176) -0.139 (0.282) 0.073 (0.287) 0.053 (0.252) %Old (> 64) 0.128 (0.586) 0.081 (0.605) 0.004 (1.174) -0.262 (1.201) -2.384 (1.704) -0.681 (1.400) %Young (< 35) 0.187 (0.418) 0.145 (0.473) 0.819 (0.743) 0.629 (0.833) -0.779 (1.022) 0.287 (0.948) %College grad 0.616*** (0.207) 639 0.795 Pop 2007-8 (logs) Land sq mtrs (logs) Average HH Size Med. HH Income (000’s) Ethnic HHI 0.611*** 0.812** 0.846** 0.467 0.920*** (0.202) (0.337) (0.329) (0.464) (0.318) Observations 639 149 154 173 149 R2 0.794 0.860 0.856 0.791 0.830 Instrument(s) 1 1 2 1 and 2 Cragg Donald F Stat 53.13 8.51 14.84 11.19 K-P Wald F 29.01 6.96 12.26 14.66 Stock Yogo 10% Size 16.38 16.38 16.38 19.93 Stock Yogo 15% Size 8.96 8.96 8.96 11.59 Anderson Rubin p-val 0.786 0.035 0.000 0.000 Standard errors in parentheses, clustered at MSA level. * p<0.1 ** p<0.05 *** p<0.01 IV specifications instrument for log land area. Instrument 1 is county population in 1900, instrument 2 is share of unavailable land from Saiz QJE 2010. For specification 6 I test the overidentifying restrictions and find a Hansen J statistic p-value of .3092, indicating valid instruments. 29 ethnicity v and show that even after controlling for the size of this population, the spatial concentration of the population increases the likelihood of having a restaurant of cuisine v. Following the model, if population subgroups with an affinity for a particular variety are clustered in space, rather than uniformly distributed as assumed earlier, then this clustering would lower the minimum population required for entry of that variety. While spatial concentration of a particular population would also be consistent with a supply-side explanation–perhaps ethnic clustering provides a more easily accessible supply of workers skilled in the preparation of a particular cuisine–I would argue for a demand-side interpretation. A restaurant requires far more customers than employees and it is much easier for a few employees to commute to a different neighborhood than to move the customer base. From the perspective of the restaurant owner it would seem that consumer location should weigh more heavily than employee location. I use the Moran’s I measure of spatial auto-correlation to capture the general clustering/dispersion of an ethnic population in a city. Specifically, I count the number of people born in each country in each census tract with 2000 Census data and then calculate the correlation between neighboring tracts: N N I= ∑ ∑ wi j (Xi − X̄)(X j − X̄) i=1 j=1 N N 2 ∑ (Xi − X̄) ∑ wi j N N ∑ i=1 j=1 (22) i=1 In equation 22 Xi and X j represent the ethnic population in two neighboring tracts where X̄ is the average across all tracts. The weights matrix wi j is a matrix of 1’s and 0’s indicating whether two tracts are neighbors39 ; N is the total number of tracts in a city. I calculate this measure for each ethnicity in each city; if a city does not have any people of that ethnicity I cannot calculate the statistic and drop that city-cuisine pair from this analysis40 . The Moran’s I is a measure of correlation and thus ranges from -1 to 1 with an −1 when there is no spatial autocorrelation. It is important to note that the expected expected value of N−1 value of Moran’s I does not depend on X and thus cities with a greater percentage of people from a given ethnicity do not necessarily have a greater Moran’s I. Many of the cities in the lower land quartiles have few census tracts and so I restrict the analysis to the 182 cities of the top land quartile. In Table 9 I break up each ethnic cuisine into cities with a restaurant of that cuisine and cities without and show the average percentage of people from that ethnicity and the average Moran’s I for each group. Even when limiting to the top land quartile some cities have too few people from a given ethnicity to calculate the spatial distribution and so not all cuisines will have 182 cities listed. From the table it is clear that cities with a restaurant of a given ethnic cuisine tend to have a greater percentage of people from that ethnicity as well as a much higher Moran’s I, indicating greater spatial correlation of residential location. In order to separate the effect of the size of the ethnic population from the spatial distribution of that population I re-run the pooled logit specification shown in Table 4, adding in the Moran’s I statistic and again, restricting to the top land quartile. In the first column of panel of Table 10 I run the previous specification on the reduced sample and obtain similar results to column 8 of Table 4. Turning to column 2, the Moran’s I statistic is quite significant and somewhat reduces the magnitude of the coefficient on population, land, and ethnicity. It is difficult to compare the magnitudes of these coefficients but since Moran’s I ranges from −1 to 1 and ethnic percentage from 0 to 1 a rough approximation is that a 1% increase in the percentage of the population belonging to a given ethnicity increases the likelihood of a city having that cuisine by the same 39 I used the ”Queen” adjacency definition–named after the chess piece’s movement–so that two tracts are neighbors if they have any shared borders. 40 I used the ”spdep” package in R to run the analysis. 30 amount as a .03 increase in the spatial correlation of that population. In other words, bringing the ethnic population of a city closer together can achieve the same result as increasing the size of that population. These results show an effect of spatial concentration but do not imply that this effect comes from reduced transportation cost to a restaurant. To show the proximity of restaurants to ethnic concentrations I estimate the probability a particular census tract has a restaurant of cuisine v on measures of the census tract population of ethnicity v. I take the set of all census tracts with a restaurant for every city and pool all ethnic cuisines, removing cuisines with too few observations to be estimated, and include controls, cuisine fixed effects, and city fixed effects. The third column of Table 10 shows that census tracts with larger populations of ethnicity v are more likely to have a corresponding restaurant while the fourth column shows the same thing using the percentage of the census tract population in ethnicity v. I also estimated separate linear probability models for each ethnic cuisine (not shown) and found that 38 of the 40 cuisines had a positive coefficient on census tract ethnic population with 23 of these cuisines having statistically significant coefficients41 . The proximity of ethnic populations to ethnic restaurants argues against variety being completely driven by gourmands. Taken together, these estimates show that more concentrated ethnic populations increase the likelihood of a city having a restaurant of the corresponding cuisine and that these restaurants are often located close to the corresponding populations. 5 Conclusion In this paper I have argued that a significant amount of variety in the restaurant market results from the aggregation of specific tastes from a heterogeneous population. I presented a simple model of demand aggregation where the fixed cost of opening up a restaurant combined with heterogeneous tastes led to cuisine specific entry thresholds. The importance of transportation cost in restaurant consumption implies that the spatial distribution of a population is a key determinant of whether demand passes this threshold. Cities that concentrate a large population into a small area increase the mass of consumers demanding specific varieties and thereby increase the likelihood a firm finds sufficient demand for its product. In the empirical section I found that the pattern of cuisines across US cities follows a fairly regular hierarchical distribution that is consistent with this type of threshold model and echoes findings from Central Place Theory papers studying industrial composition. Varieties that appeal to fewer people are much more likely to be found in bigger and denser cities because spatial aggregation becomes more important when demand is limited. For this reason, larger and denser cities have both greater variety and rarer varieties of restaurants. This finding was consistent across multiple specifications, including within cuisines and when estimated at the cuisine-level, and when using instrumental variables to estimate the effect of density. The presence of ethnic neighborhoods or other geographic clustering of tastes facilitates the spatial aggregation of demand and can significantly increase the likelihood a market supports a particular variety. Overall, the results in this paper show a link between city structure and product differentiation and provide empirical evidence for the effect of demand aggregation on one of the important consumer benefits of agglomeration. 41 I dropped ethnic cuisines where the estimated model failed the F test. Two of the cuisines had negative but statistically insignificant coefficients on ethnic population size. I also estimated separate models using ethnic population percentage, with very similar results. 31 Table 9: Ethnic clustering with matched cuisines Cuisine Afghan Afghan African African American (New) American (New) American (Traditional) American (Traditional) Argentinean Argentinean Armenian Armenian Asian Asian Austrian Austrian Belgian Belgian Brazilian Brazilian Burmese Burmese Cambodian Cambodian Caribbean Caribbean Central European Central European Chilean Chilean Chinese Chinese Colombian Colombian Cuban Cuban Dim Sum Dim Sum Eastern European Eastern European Egyptian Egyptian English English Ethiopian Ethiopian Filipino Filipino French French German German Greek Greek Hungarian Hungarian Indian Indian Indonesian Indonesian Has Restaurant 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 City Count 99 9 160 20 63 119 9 173 144 10 79 2 54 128 159 1 159 7 147 21 138 2 133 4 121 59 177 5 147 3 4 173 165 9 141 30 175 2 169 13 158 3 158 24 118 11 176 6 69 111 124 58 56 108 162 3 74 106 142 10 Ethnic % 0.057% 0.183% 0.341% 0.707% 87.408% 85.081% 93.064% 85.513% 0.053% 0.118% 0.024% 4.844% 2.534% 5.085% 0.028% 0.084% 0.036% 0.049% 0.105% 0.109% 0.030% 0.251% 0.099% 0.231% 0.257% 1.981% 0.650% 2.481% 0.041% 0.067% 0.000% 0.453% 0.193% 0.598% 0.183% 0.457% 0.419% 2.509% 0.638% 1.511% 0.047% 0.127% 0.292% 0.289% 0.038% 0.120% 0.671% 3.125% 0.048% 0.075% 0.278% 0.311% 0.042% 0.067% 0.035% 0.096% 0.327% 0.643% 0.042% 0.092% Moran's I ‐0.016 0.072 0.034 0.236 0.041 0.146 ‐0.021 0.117 ‐0.016 0.022 ‐0.006 0.538 0.123 0.230 0.001 0.322 ‐0.009 0.110 0.004 0.094 ‐0.001 0.176 0.025 0.188 0.011 0.150 0.065 0.449 ‐0.013 0.078 ‐0.088 0.072 0.015 0.237 0.001 0.143 0.065 0.355 0.052 0.374 ‐0.004 0.182 0.039 0.228 0.006 0.096 0.094 0.502 0.028 ‐0.028 0.046 0.020 0.172 ‐0.049 0.053 ‐0.004 0.296 0.016 0.153 0.001 32 0.129 Cuisine Irish Irish Italian Italian Jamaican Jamaican Japanese Japanese Korean Korean Lebanese Lebanese Malaysian Malaysian Mediterranean Mediterranean Mexican Mexican Middle Eastern Middle Eastern Moroccan Moroccan Noodle Shop Noodle Shop Latin American Latin American Polish & Czech Polish & Czech Polynesian Polynesian Portuguese Portuguese Puerto Rican Puerto Rican Russian Russian Scandinavian Scandinavian South American South American Spanish Spanish Sushi Sushi Swiss Swiss Thai Thai Tibetan Tibetan Turkish Turkish Venezuelan Venezuelan Vietnamese Vietnamese Pan‐Asian & Pacific Rim Pan‐Asian & Pacific Rim Has Restaurant 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 0 1 City Count 130 39 11 167 157 6 31 148 118 62 140 18 139 8 129 52 3 179 109 70 144 9 156 21 151 31 174 3 91 5 135 3 179 3 170 5 167 2 165 17 127 36 132 47 158 8 45 128 175 2 150 7 152 4 93 87 143 39 Ethnic % 0.042% 0.079% 0.053% 0.127% 0.228% 0.594% 0.049% 0.223% 0.258% 0.653% 0.046% 0.786% 0.027% 0.057% 0.252% 0.289% 0.505% 4.952% 0.230% 0.903% 0.033% 0.072% 0.307% 1.447% 6.594% 9.499% 0.135% 0.955% 0.035% 0.043% 0.064% 0.054% 0.436% 1.851% 0.126% 0.436% 0.038% 0.053% 0.678% 1.037% 0.032% 0.060% 0.185% 0.214% 0.035% 0.063% 0.029% 0.106% 0.389% 5.120% 0.035% 0.058% 0.082% 0.106% 0.213% 0.904% 3.521% 7.291% Moran's I ‐0.013 0.067 ‐0.114 0.046 0.017 0.288 ‐0.018 0.076 0.037 0.192 0.012 0.139 0.003 0.125 0.001 0.151 ‐0.148 0.187 0.017 0.166 ‐0.013 0.144 0.048 0.222 0.173 0.354 0.024 0.302 ‐0.015 0.059 0.003 0.115 0.041 0.412 0.035 0.369 0.004 0.153 0.034 0.278 ‐0.040 0.031 0.033 0.134 ‐0.004 0.006 ‐0.060 0.045 0.064 0.464 ‐0.007 0.121 ‐0.007 0.113 0.011 0.201 0.161 0.334 Table 10: Likelihood of having a given cuisine with clustered ethnic populations Places (LQ1) Tracts (All) (1) (2) (3) (4) Logit Logit OLS OLS Pop 2007-8 (logs) 0.133*** 0.120*** (0.006) (0.006) Land sq mtrs (logs) -0.042*** (0.007) -0.037*** (0.007) Average HH Size -0.082*** (0.032) -0.080*** (0.031) -0.028*** (0.003) -0.027*** (0.003) Median HH income (000’s) -0.001 (0.001) -0.001 (0.001) -0.000** (0.000) -0.000** (0.000) %Old (> 64) -0.070 (0.281) -0.067 (0.282) -0.025* (0.015) -0.023 (0.016) %Young (< 35) -0.047 (0.187) -0.047 (0.186) 0.028*** (0.006) 0.035*** (0.006) %College grad 0.303*** (0.072) 0.307*** (0.071) 0.034*** (0.006) 0.038*** (0.006) %Corresponding ethnicity 0.428*** (0.089) 0.372*** (0.094) Moran’s I 0.292*** (0.015) 0.136*** (0.022) Corr. 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(2008): “The median voter and the median consumer: Local private goods and population composition,” Journal of Urban Economics, 63(2), 567–582. 35 6 Appendix 6.1 Multiple Firms With multiple firms there are three possible equilibria, which I label following (Salop 1979): an equilibria where firms compete with neighbors for consumers (”competitive”), an equilibria where firms are local monopolists but do not have a large enough market extent to set monopoly prices (”kinked”), and an equilibria where each firm operates as a local monopolist in its market (”monopoly”). The equilibria are determined by the distance from the firm to the indifferent consumer, who many now be indifferent between the reserve good or the good of a competing firm. Let dm represent the distance to a consumer indifferent between the product and the reserve good, dc the distance when a consumer is indifferent between two neighboring firms setting equal prices in equilibrium, and n is the number of firms: u1 − u0 − pm τ L = 2n dm = (23) dc (24) The land area in the market determines the price a firm sets, which in turn determines the distance to the indifferent consumer. The competitive equilibrium has a symmetric Nash equilibrium with prices as a best response to competing firms while in the monopoly equilibrium the firm chooses a price to maximize profit given the reserve good. The kinked equilibrium price is found by equating dm = dc and solving for price. pc = c + τL n τL 2n u1 − u0 + c = 2 (25) pk = u1 − u0 − (26) pm (27) When pc < pk then we must be in the competitive equilibrium since any firm charging pk would be undercut. ∗ Once land expands to L = 2n 3 L then pk becomes smaller than pc and we are in the kinked equilibrium; if the firm tried to charge pc the consumer would consume their reserve good. The kinked equilibrium case is very similar to the minimum entry condition for the single firm in that the firm would like to charge the monopolist’s price but is constrained in geographic extent, this time by the presence of the other firms. In fact, the kinked equilibrium frontier collapses to the minimum entry condition when n = 1. Finally, at L = nL∗ there will be exactly n local monopolists charging the monopoly price of pm . For L > nL∗ there will be a monopoly equilibrium with n firms but with gaps between the geographic market extents42 . ∗ ∗ 2 N L n ∗ if L ≤ 2n L 3 L , ”full coverage, competitive equilibrium” ∗ L∗ n2 ∗ ∗ Nmin (n, L) = 2N (28) if 2n 2nL∗ −L 3 L < L ≤ nL , ”full coverage, kinked equilibrium” 2N ∗ L if nL∗ < L, ”partial coverage, local monopoly equilibrium” L∗ there are n firms in the market and L > nL∗ then the profit to the firms as monopolists with gaps is higher than the kinked profit and thus charging the price pk < pm is not an equilibrium strategy. 42 If 36 6.2 Hierarchy Test of Mori, Nishikimi, and Smith (2008) Following MNS, I formally define a hierarchical structure of cuisines across cities as a distribution such that if a cuisine is found in a cities with n cuisines it will also be found in all cities with greater than n cuisines. Consider the matrix of cuisine-city indicators, with cuisines sorted by ascending city choice count and cities by ascending numbers of cuisines, as seen in the plots in Figure 5. For each cuisine-city pair, MNS define a hierarchy event as a binary variable equal to one only when all cities with greater or equal number of cuisines also have that cuisine. Graphically, for each dot a hierarchy event occurs if all other slots in the same row to the right of the dot are filled. As an example, if 725 of the cities have cuisine v and the city missing cuisine v has the fewest overall number of cuisines (furthest to the left) then a hierarchy event occurs for all cuisine-city pairs in cuisine v’s row. However, if instead the city missing the cuisine was the city with the most overall cuisines (furthest to the right), then there would not be a hierarchy event for any of the cuisine-city pairs. It’s important to note that if two cities have the same number of overall cuisines but one of the cities is missing cuisine v then neither city has a hierarchy event for cuisine v. MNS define the hierarchy share as the percentage of cuisine-city pairs that are hierarchy events, or graphically, the percentage of dots that are hierarchy events. Having defined the hierarchy share, I then test the null hypothesis that cuisines are randomly assigned to cities, with the number of cuisines in each city fixed and equal to the observed count. In other words, a city with just one type of cuisine should be no more likely to have a Chinese restaurant than an Afghan restaurant. Rather than deriving the distribution of the hierarchy-share statistic, I will run a simulation to estimate the cumulative distribution function of hierarchy share and then accept or reject the null hypothesis of no hierarchy. The procedure is for each city m draw #vm varieties from the total set V and then calculate the hierarchy-share. I repeat this procedure 10, 000 times to get a distribution of hierarchy-share under the null hypothesis. When I calculate the hierarchy share for all 726 places I find a hierarchy share of 23% for cuisine measure 1 and 16% for cuisine measure 2, with both statistics highly significant (the largest values from 10000 simulated runs were 2.9% and 3.6% for cuisine measures 1 and 2, respectively). For comparison, MNS found that the distribution of industries in Japan in 1999 had a hierarchy share of 71%, much larger than the shares I find here. Nonetheless, the hierarchical structure of cuisines across cities is still very far from random and is rather surprising considering that cities differ dramatically in ethnic composition, income, family size, education, and other factors that may affect the cuisines offered. 6.3 Additional Estimation Results and Statistics Tables follow. 37 Table 11: Cuisine-level Logit Model Estimaton Cuisine Number Cities Pop 2007‐8 (logs) 2.104*** [0.487] 2.100*** [0.497] 1.408*** [0.216] 1.654*** [0.228] 1.891*** [0.531] Afghan 17 African 27 American (New) 253 American (Traditional) 545 Argentinean 13 Armenian 2 Asian 322 Austrian 2 Bakeries 404 Barbecue 507 Belgian 7 Brazilian 34 Burmese 4 Cajun & Creole 148 Californian 134 Cambodian 5 Caribbean 96 Central European 7 Chilean 3 Chinese 670 Coffee Shops & Diners 373 Colombian 10 Cuban 43 Deli 600 Desserts 482 Dim Sum 4 Eastern European 21 Eclectic & International 155 Egyptian 3 English 37 Ethiopian 14 Filipino 9 French 272 German 85 Greek 227 Hamburgers 280 Health Food 68 Hot Dogs 55 Hungarian 4 Indian 222 Indonesian 10 Irish 70 Italian 528 Jamaican 7 Japanese 407 1.533*** [0.188] 1.845*** [0.187] 0.740*** [0.160] 6.360** [2.698] 2.218*** [0.445] 1.696** [0.860] 1.494*** [0.215] 1.653*** [0.241] 5.104** [1.979] 1.466*** [0.263] 4.330*** [1.552] 2.450* [1.340] 2.095*** [0.328] 1.353*** [0.163] 2.514*** [0.701] 2.803*** [0.475] 1.479*** [0.204] 1.246*** [0.160] 1.433* [0.798] 2.315*** [0.497] 1.632*** [0.223] 2.271*** [0.433] 2.550*** [0.651] 3.017*** [0.809] 1.238*** [0.181] 1.344*** [0.258] 1.757*** [0.212] 1.697*** [0.183] 1.431*** [0.302] 1.099*** [0.265] 2.086** [0.910] 1.958*** [0.233] 5.834*** [1.827] 1.143*** [0.275] 2.026*** [0.232] 1.829** [0.721] 1.545*** [0.196] Land sq mtrs (logs) Av HH Size ‐1.113** ‐3.444** [0.485] [1.521] ‐0.618 ‐0.905 [0.426] [1.184] 0.034 ‐1.490*** [0.199] [0.423] 0.253 ‐2.358*** [0.188] [0.449] ‐0.649 ‐1.468 [0.525] [1.540] ‐0.193 [0.171] ‐0.364** [0.163] 0.775*** [0.159] 1.544 [1.664] ‐0.597 [0.378] ‐1.189 [1.020] ‐0.252 [0.199] ‐0.299 [0.218] ‐3.661** [1.758] ‐0.125 [0.248] 0.03 [1.205] 0.96 [1.766] ‐0.005 [0.239] 0.22 [0.151] ‐0.912 [0.640] ‐1.110*** [0.373] ‐0.011 [0.175] 0.094 [0.145] ‐0.968 [0.927] ‐1.313*** [0.457] ‐0.3 [0.206] ‐0.781** [0.374] ‐1.001* [0.600] ‐1.799** [0.777] ‐0.079 [0.172] ‐0.02 [0.242] ‐0.184 [0.193] ‐0.358** [0.164] 0.057 [0.276] ‐0.209 [0.260] ‐0.097 [0.962] ‐0.362* [0.205] ‐1.181 [1.006] ‐0.185 [0.270] ‐0.293 [0.187] 0.224 [0.743] ‐0.087 [0.180] Med HH Inc 0.025 [0.032] ‐0.041 [0.031] 0.019* [0.010] 0.016 [0.011] ‐0.019 [0.040] ‐1.331*** 0.021** [0.366] [0.010] ‐1.294*** [0.359] 0.338 [0.337] ‐29.060* [15.075] ‐1.868* [1.086] ‐0.293 [2.081] ‐0.825* [0.452] ‐2.323*** [0.549] ‐2.478 [4.121] ‐2.195*** [0.647] ‐15.335** [6.448] ‐1.353 [6.774] ‐0.543 [0.553] ‐0.397 [0.334] ‐0.284 [1.955] ‐1.888* [0.983] ‐1.739*** [0.407] ‐0.608* [0.326] 1.693 [1.597] ‐1.404 [1.174] ‐2.571*** [0.515] 0.032*** [0.011] ‐0.025** [0.011] 0.253 [0.254] ‐0.004 [0.024] ‐0.046 [0.068] ‐0.022* [0.013] 0.042*** [0.012] ‐0.123 [0.131] ‐0.014 [0.017] 0.242** [0.106] ‐0.313 [0.304] ‐0.019 [0.017] ‐0.005 [0.010] ‐0.006 [0.055] 0.027 [0.026] 0.004 [0.012] 0.003 [0.010] ‐0.098* [0.059] ‐0.037 [0.035] 0.025** [0.012] ‐3.618*** 0.048* [1.231] [0.027] ‐3.202 ‐0.065 [2.157] [0.053] ‐0.735 0.073 [1.648] [0.055] ‐1.116*** ‐0.014 [0.396] [0.011] ‐0.029 ‐0.022 [0.566] [0.019] ‐2.310*** ‐0.002 [0.460] [0.012] ‐0.970*** 0.028*** [0.357] [0.010] 0.053 ‐0.040** [0.680] [0.019] ‐1.336* ‐0.004 [0.702] [0.018] ‐2.296 0.034 [4.056] [0.095] ‐1.307*** ‐0.003 [0.432] [0.012] ‐14.835** 0.239* [6.207] [0.123] ‐2.256*** 0.001 [0.699] [0.017] ‐1.749*** 0.012 [0.447] [0.013] ‐4.979 ‐0.046 [3.201] [0.074] ‐0.598 ‐0.001 [0.380] [0.011] %College % Ethnicity Grad 2.443 [3.336] 6.677** [2.887] 1.236 [1.197] ‐1.102 [1.352] 5.318 [3.807] ‐1.836 [1.134] 0.685 [1.157] 3.732*** [1.244] ‐31.662 [22.646] 6.868*** [2.573] 2.83 [6.828] 4.148*** [1.397] 2.35 [1.431] 9.279 [8.518] 2.094 [1.667] ‐5.964 [10.947] 21.329 [15.726] 1.322 [2.065] 0.868 [1.132] 4.991 [5.778] 2.034 [2.800] 0.617 [1.469] ‐0.661 [1.118] 8.523* [4.882] 4.064 [3.055] 1.685 [1.348] 317.656*** [116.301] 15.966 [44.266] ‐0.519 [1.075] ‐0.354 [1.179] 145.758 [96.582] Cons. ‐1.809 [5.060] ‐14.944*** [5.129] ‐13.405*** [2.225] ‐13.827*** [2.706] ‐11.937* [6.469] Pseudo R‐Sq Cuisine 0.37 Korean 108 0.47 Kosher 21 0.31 Lebanese 23 0.31 Malaysian 14 0.38 Mediterranean 89 Meat‐and‐Three 4 7.049*** ‐10.328*** 0.30 [1.928] [1.931] 3588.876 [4526.048] 76.591*** [27.879] 424.601** [201.424] 108.66 [122.119] 10.476*** [2.688] 85.129 [56.030] 537.512 [673.119] 55.773 [58.938] 31.352 [23.551] 21.028*** [5.544] 18.358 [12.318] 23.416 [14.585] ‐11.209*** [2.008] ‐20.802*** [2.260] ‐50.101* [29.048] ‐16.006*** [4.585] ‐2.03 [11.933] ‐11.555*** [2.298] ‐11.645*** [2.400] 6.406 [16.645] ‐10.653*** [2.682] ‐33.705* [17.891] ‐48.376 [29.369] ‐16.100*** [3.713] ‐16.862*** [2.063] ‐18.636** [8.444] ‐12.694*** [4.101] ‐8.981*** [2.448] ‐12.046*** [1.959] ‐7.632 [12.014] ‐3.177 [4.878] ‐9.216*** [2.243] Number Pop 2007‐8 Land sq Cities (logs) mtrs (logs) Mexican 629 Middle Eastern 115 Moroccan 10 0.25 Noodle Shop 39 0.78 Latin American 44 0.47 Pizza 700 0.32 0.34 Polish & Czech 4 0.32 Polynesian 9 0.35 Portuguese 4 0.70 Puerto Rican 3 0.38 Russian 5 0.75 Scandinavian 4 0.69 Seafood 448 0.29 Soups 260 0.29 South American 22 0.47 Southern & Soul 83 0.48 Southwestern 45 0.24 Spanish 58 0.21 Steakhouse 320 0.29 Sushi 73 0.40 Swiss 9 0.34 Tapas / Small Plates 32 Thai 340 Tibetan 3 ‐8.008** 0.41 ‐1.251 44.204 [2.758] [86.458] [4.030] 8.673** 600.765** ‐9.144 0.59 [4.110] [272.326] [7.257] ‐5.545 12.968* ‐7.372 0.45 [7.247] [7.366] [8.251] 5.012*** 310.642** ‐10.752*** 0.31 [1.264] [125.870] [2.030] ‐1.408 136.048** ‐15.475*** 0.35 [1.989] [64.209] [3.014] 2.384* 255.460*** ‐11.478*** 0.38 [1.314] [74.733] [2.251] ‐11.336*** 0.29 0.253 [1.135] [1.970] ‐20.165*** 0.41 6.601*** [1.941] [3.533] 2.502 ‐8.388*** 0.22 [1.875] [2.909] 3.376 888.313 ‐26.690* 0.51 [10.907] [548.514] [14.434] 4.275*** 61.381*** ‐14.120*** 0.42 [1.349] [13.247] [2.394] ‐13.261 1128.759** ‐26.477* 0.78 [13.588] [462.489] [15.710] 2.082 ‐50.102 ‐6.743** 0.25 [1.710] [149.604] [2.819] 3.314** 136.550** ‐11.882*** 0.38 [1.494] [61.515] [2.455] 9.879 72.855** ‐21.136* 0.53 [6.009] [33.279] [11.494] 3.621*** 508.449*** ‐14.631*** 0.41 [1.323] [81.732] [2.264] 38 Turkish 7 Vegan 29 Vegetarian 132 Venezuelan 4 Vietnamese 160 Fast Food 684 Coffeehouse 393 Pan‐Asian & Pacific Rim 73 Family Fare 340 Cheesesteak 19 Chowder 6 Ice Cream 417 Bagels 120 Donuts 61 Juices & Smoothies 58 Av HH Size Med HH Inc %College % Grad Ethnicity Cons. Pseudo R‐Sq 1.821*** [0.280] 2.522*** [0.514] 1.381*** [0.436] 3.534*** [0.818] 1.968*** [0.313] 1.014 [0.705] 0.629*** [0.236] 2.238*** [0.301] 3.173*** [0.925] 1.490*** [0.413] 1.686*** [0.375] 2.307*** [0.430] 1.517** [0.741] 1.713*** [0.559] 4.602** [2.156] ‐0.455* 0.667 ‐0.023 3.258* 56.679***‐16.127*** [0.242] [0.504] [0.016] [1.714] [13.491] [2.866] ‐1.362*** ‐2.163* 0.027 ‐3.429 ‐2.694 [0.450] [1.197] [0.039] [3.943] [4.601] 0.113 ‐2.367 0.021 2.626 517.796***‐18.184*** [0.427] [1.486] [0.034] [3.641] [138.737] [5.529] ‐1.815*** 0.913 0.008 5.032 1062.794** ‐18.405** [0.645] [1.401] [0.041] [5.241] [356.400] [7.747] ‐0.644** ‐1.812*** 0 6.358*** ‐21.389 ‐10.424*** [0.285] [0.663] [0.016] [1.755] [29.950] [3.032] 0.791 ‐5.394 ‐0.077 3.818 ‐17.404 [0.778] [4.284] [0.137] [10.032] [12.385] 1.051*** 0.167 ‐0.038*** 5.505*** 30.561***‐22.830*** [0.223] [0.492] [0.014] [1.625] [9.503] [3.188] ‐0.559** ‐0.882 0.008 3.380** 55.920***‐16.389*** [0.248] [0.548] [0.015] [1.674] [18.351] [2.894] ‐0.171 ‐6.006* 0.143* ‐6.422 1664.923**‐31.020** [0.743] [3.489] [0.082] [9.479] [691.472] [13.080] ‐0.366 ‐0.798 ‐0.01 6.092*** 75.376***‐13.916*** [0.381] [0.881] [0.020] [2.329] [16.376] [4.124] ‐0.248 ‐2.458** ‐0.007 5.524** 5.519** ‐13.689*** [0.333] [1.003] [0.023] [2.311] [2.134] [3.783] ‐0.185 ‐2.689*** 0.048** ‐7.746*** ‐8.772* [0.313] [0.740] [0.023] [2.729] [4.850] 0.232 ‐3.95 0.065 2.342 77.399 ‐22.407 [0.978] [3.550] [0.063] [8.816] [48.240] [14.216] ‐0.884 0.359 ‐0.024 3.988 ‐0.948 ‐9.44 [0.579] [1.364] [0.044] [4.478] [384.041] [7.200] ‐2.477 ‐10.573 ‐0.247 7.152 114.91 14.728 [1.809] [7.769] [0.177] [10.095] [115.530] [18.377] 0.40 3.070** [1.324] 2.316*** [0.856] 1.232*** [0.160] 1.542*** [0.174] 1.955*** [0.467] 1.710*** [0.291] 0.845*** [0.296] 2.256*** [0.363] 0.930*** [0.150] 1.611*** [0.298] 0.905* [0.530] 2.407*** [0.472] 2.100*** [0.213] 1.157 [1.023] 2.189** [0.855] 2.414*** [0.489] 2.200*** [0.282] 1.861** [0.807] 1.902*** [0.273] 1.373*** [0.297] 2.176*** [0.213] 2.455*** [0.385] 1.659*** [0.172] 1.147*** [0.389] 2.629*** [0.786] 1.994*** [0.199] 1.471*** [0.246] 1.362*** [0.272] 1.624*** [0.295] 0.739 [1.339] ‐1.387 [0.936] 0.18 [0.148] ‐0.399** [0.160] ‐0.578 [0.434] ‐0.249 [0.262] 0.373 [0.299] ‐0.876*** [0.309] 0.466*** [0.149] ‐0.357 [0.269] 0.504 [0.582] ‐0.794** [0.390] ‐0.707*** [0.185] 0.398 [1.248] 1.547 [0.996] ‐0.784* [0.412] ‐0.656*** [0.240] 0.245 [1.005] ‐0.437* [0.239] ‐0.208 [0.257] ‐0.663*** [0.181] ‐1.042*** [0.331] ‐0.458*** [0.155] ‐0.095 [0.405] ‐1.179 [0.793] ‐0.466*** [0.170] ‐0.202 [0.228] ‐0.416 [0.255] ‐0.588** [0.267] 0.70 ‐4.873 [6.961] ‐1.312 [2.194] ‐1.200*** [0.340] ‐0.062 [0.337] ‐1.536 [1.291] ‐0.525 [0.581] ‐1.194 [0.893] ‐2.555*** [0.804] ‐1.510*** [0.353] ‐1.589** [0.706] ‐1.117 [2.012] ‐1.916* [1.118] ‐1.409*** [0.393] ‐7.024 [4.795] ‐5.546 [3.759] ‐3.002** [1.317] ‐1.031* [0.536] ‐0.66 [3.655] ‐1.426*** [0.544] ‐0.011 [0.643] ‐0.635* [0.384] ‐2.842*** [0.779] ‐1.281*** [0.339] ‐4.097*** [1.376] ‐1.65 [2.569] ‐0.878** [0.366] ‐2.277*** [0.597] 0.32 [0.561] 0.472 [0.577] 0.032 [0.204] 0.073 [0.069] ‐0.01 [0.010] ‐0.018 [0.011] 0.001 [0.031] ‐0.044** [0.019] ‐0.03 [0.022] ‐0.001 [0.021] 0.011 [0.010] ‐0.019 [0.017] 0.019 [0.043] 0.029 [0.028] 0.035*** [0.011] ‐0.098 [0.120] 0.052 [0.089] ‐0.016 [0.027] ‐0.019 [0.015] 0.034 [0.081] ‐0.016 [0.015] 0.053** [0.022] 0.050*** [0.013] 0.035** [0.016] 0.025** [0.010] 0.065** [0.030] 0.026 [0.047] 0.028** [0.011] 0.022* [0.013] ‐0.013 [0.018] 0.009 [0.017] 1.774 [18.445] ‐6.643 [9.391] 0.921 [1.154] 1.123 [1.144] 4.055 [3.266] 1.878 [1.843] 4.829** [2.149] 2.089 [2.113] ‐1.475 [1.101] 6.216*** [1.838] 3.918 [5.353] 1.316 [3.121] 1.385 [1.230] 12.105* [6.939] 13.328 [10.917] 8.153*** [2.725] 7.757*** [1.684] 7.153 [10.208] 4.324*** [1.612] ‐1.927 [2.122] 3.552*** [1.294] 3.801** [1.898] ‐0.769 [1.080] ‐5.2 [3.507] 7.44 [6.155] 2.711** [1.223] 5.458*** [1.519] 2.814 [1.886] 2.659 [1.980] 260.064 ‐49.746* [194.603] [27.265] ‐225.087 ‐4.913 [1499.573] [10.686] ‐12.015*** [1.965] ‐9.396*** [1.913] 2.358 ‐13.504** [12.261] [5.204] ‐13.988*** [3.076] ‐16.326*** [3.666] 427.424*** ‐6.967** [117.237] [3.218] ‐14.185*** [1.929] 7.964 ‐11.373*** [32.107] [2.936] 219.034 ‐23.932*** [710.303] [8.403] ‐13.700*** [4.440] 511.064***‐9.028*** [114.707] [2.056] 60.216* ‐11.857 [34.992] [16.926] 174.689 ‐56.377** [1030.183] [22.524] ‐12.232** [4.729] ‐13.670*** [2.684] 32.202 ‐35.556** [78.595] [17.559] 154.942***‐12.336*** [23.136] [2.615] ‐9.224** [3.573] ‐13.305*** [2.184] 4.561* ‐7.820** [2.418] [3.089] ‐7.321*** [1.830] ‐5.928 [4.313] ‐14.966 [10.176] ‐12.495*** [2.107] ‐11.876*** [2.499] ‐11.404*** [3.000] ‐12.931*** [3.157] 0.37 0.43 0.55 0.39 0.44 0.31 0.44 0.66 0.43 0.42 0.27 0.39 0.25 0.66 0.30 0.24 0.25 0.39 0.43 0.34 0.44 0.24 0.37 0.29 0.43 0.38 0.60 0.63 0.50 0.43 0.47 0.49 0.19 0.42 0.42 0.25 0.22 0.45 0.36 0.36 0.23 0.25 Table 12: Count of Cities with each Cuisine, by Land Quartile CUISINE Afghan MISS 1 2 3 African MISS 1 2 3 4 American (New) MISS 1 2 3 4 American (Traditional) MISS 1 2 3 4 Argentinean MISS 1 2 3 4 Armenian MISS Asian MISS 1 2 3 4 Austrian 1 3 Bakeries MISS 1 2 3 4 Barbecue MISS 1 2 3 Belgian MISS 1 2 3 Brazilian MISS 1 2 3 4 Burmese MISS 2 Cajun & Creole MISS 1 2 3 4 Californian MISS 1 2 3 4 Cambodian MISS 1 2 3 Caribbean MISS 1 2 3 4 LQ4 2 1 1 0 0 1 1 0 0 0 0 21 7 7 8 6 3 91 67 43 20 7 7 1 0 1 0 0 0 0 0 41 39 2 1 0 0 1 0 1 57 26 43 0 0 0 65 56 13 6 3 0 0 0 0 0 4 2 1 0 1 1 0 0 0 6 5 2 0 0 0 13 9 4 6 2 3 0 0 0 0 0 6 6 0 0 0 1 LQ3 2 0 1 1 0 2 1 1 0 0 0 45 7 32 7 7 4 128 108 70 34 9 7 1 0 1 0 0 0 0 0 63 59 6 0 0 0 0 0 0 83 48 61 5 1 0 121 106 36 12 3 0 0 0 0 0 1 0 1 0 0 0 1 1 0 31 24 5 5 1 1 19 9 5 8 2 3 1 0 0 0 1 14 11 3 1 0 0 LQ2 4 3 0 1 0 4 2 2 0 0 0 68 16 47 10 10 7 153 122 106 56 11 15 1 0 1 0 0 0 0 0 90 88 6 4 0 0 0 0 0 112 76 85 4 0 0 151 132 55 16 2 0 0 0 0 0 8 4 1 2 0 1 1 1 0 30 23 5 2 0 0 32 20 6 16 7 4 0 0 0 0 0 17 14 2 3 0 1 LQ1 CUISINE 9 Central European 6 MISS 21 22 23 20 4 16 Chilean 10 MISS 6 Chinese 5 MISS 11 119 2 39 3 103 4 38 Coffee Shops & Diners 28 MISS 22 1 173 2 165 3 150 Colombian 114 MISS 52 1 55 2 10 Cuban 3 MISS 51 52 43 14 2 Deli 2 MISS 128 1 126 2 30 3 17 Desserts 7 MISS 31 12 13 04 152 Dim Sum 132 MISS 130 1 19 Eastern European 9 MISS 11 170 2 160 3 115 4 57 Eclectic & International 6 MISS 71 32 43 24 2 Egyptian 21 MISS 51 92 5 English 9 MISS 61 22 23 14 81 Ethiopian 60 MISS 28 1 27 2 16 3 1 Filipino 70 MISS 40 1 36 2 52 French 19 MISS 81 42 23 14 1 German 0 MISS 59 1 49 2 17 3 16 4 7 Greek 2 MISS 1 2 3 4 LQ4 0 0 0 0 0 0 0 0 148 147 10 7 1 1 42 24 25 1 0 0 0 0 0 4 4 1 0 0 0 119 118 6 0 0 76 75 2 1 0 0 1 1 0 4 3 0 1 0 0 14 4 6 4 2 1 0 0 0 0 3 2 1 0 0 0 2 1 1 0 0 1 1 0 0 32 27 2 7 2 2 4 3 0 1 0 0 17 17 1 0 1 0 LQ3 0 0 0 0 0 0 0 0 169 169 19 6 3 1 72 42 49 0 0 0 0 0 0 2 0 1 0 0 1 147 145 10 1 0 107 105 6 4 0 0 0 0 0 4 4 0 0 0 0 21 9 13 5 4 2 0 0 0 0 5 2 2 2 0 0 1 1 0 0 0 1 1 0 0 52 43 4 10 8 4 6 6 0 0 0 0 43 42 3 2 0 0 LQ2 2 1 0 0 1 0 0 0 175 174 32 5 1 0 106 67 81 0 0 1 1 0 0 7 4 1 0 1 1 163 163 13 0 0 137 132 17 8 0 0 1 0 1 0 0 0 0 0 0 40 11 23 8 4 4 0 0 0 0 5 2 2 1 1 0 0 0 0 0 0 1 0 0 1 77 67 5 15 8 7 17 15 1 1 0 0 53 50 4 1 0 0 LQ1 CUISINE 5 Hamburgers 3 MISS 21 12 23 2 Health Food 3 MISS 31 178 2 178 4 75 Hot Dogs 36 MISS 10 1 42 153 Hungarian 128 MISS 127 1 12 Indian 4 MISS 91 82 13 24 30 Indonesian 18 MISS 14 1 11 2 33 0 Irish 171 MISS 171 1 46 2 83 2 Italian 162 MISS 161 1 47 2 26 3 54 4 Jamaican 2 MISS 21 02 13 Japanese 5 MISS 51 72 33 14 80 Korean 38 MISS 49 1 39 2 30 3 19 Kosher 3 MISS 11 12 14 24 Lebanese 13 MISS 14 1 72 24 1 Malaysian 11 MISS 71 62 23 1 Mediterranean 6 MISS 51 32 03 111 4 110 Meat‐and‐Three 22 MISS 42 1 32 3 31 Mexican 58 MISS 50 1 92 11 3 94 1 Middle Eastern 114 MISS 113 1 32 2 20 3 7 Moroccan 2 MISS 1 2 3 4 LQ4 LQ3 LQ2 LQ1 CUISINE 30 51 73 126 Noodle Shop 11 18 23 66 MISS 19 39 56 105 1 1 4 5 16 2 0 0 0 3 Latin American 3 5 6 54 MISS 1 1 2 20 1 2 3 4 43 2 0 1 0 33 0 0 0 14 3 8 12 32 Pizza 2 3 6 16 MISS 1 6 6 21 1 0 0 0 12 0 0 1 33 0 0 0 34 0 0 1 0 Polish & Czech 21 39 56 106 MISS 19 37 54 103 1 1 6 11 37 Polynesian 6 4 4 22 MISS 1 0 1 41 0 0 0 23 0 0 0 10 Portuguese 0 0 0 8 MISS 0 0 0 21 0 0 0 12 0 0 0 1 Puerto Rican 6 8 17 39 MISS 6 5 13 28 1 1 2 1 17 2 0 1 3 6 Russian 0 0 0 2 MISS 91 120 147 170 1 80 116 137 167 2 28 43 74 134 4 16 28 53 105 Scandinavian 4 11 18 46 MISS 3 4 3 24 2 0 1 0 6 Seafood 0 0 0 1 MISS 0 1 0 51 0 0 0 12 59 82 118 148 3 56 81 117 145 4 6 11 13 38 Soups 8 9 19 57 MISS 1 2 1 29 1 1 1 4 9 South American 10 15 21 62 MISS 10 15 20 60 1 0 1 2 10 2 0 2 2 83 0 0 0 24 3 0 3 15 Southern & Soul 3 0 3 14 MISS 0 0 0 31 0 0 0 22 0 0 0 13 1 2 2 18 4 1 1 1 6 Southwestern 0 1 1 10 MISS 0 0 0 31 0 0 0 12 0 3 3 83 0 2 2 44 0 0 1 3 Spanish 0 0 0 2 MISS 0 1 0 01 10 7 20 52 2 6 4 17 44 3 0 1 0 15 4 3 2 3 24 Steakhouse 1 2 1 15 MISS 1 0 2 61 0 0 0 42 0 0 0 23 0 0 0 34 0 0 0 1 Sushi 123 153 174 179 MISS 118 150 168 178 1 25 42 82 124 2 11 14 20 69 3 0 1 1 18 Swiss 0 0 0 3 MISS 8 16 21 70 2 8 12 18 57 Tapas / Small Plates 0 6 3 28 MISS 1 0 2 14 1 0 0 0 52 1 0 0 93 0 0 0 3 0 0 0 2 0 0 0 5 1 0 0 1 0 0 0 1 39 LQ4 5 5 1 0 3 2 1 0 0 0 164 154 63 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 64 54 12 12 8 4 27 27 0 1 1 0 0 0 0 4 4 0 0 0 0 3 2 1 0 0 0 2 1 0 1 0 0 35 24 1 2 9 6 6 3 0 4 0 0 0 0 2 1 0 1 0 LQ3 6 5 2 0 5 3 1 1 0 0 178 170 100 4 0 0 0 0 0 3 3 0 0 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 104 90 11 27 5 4 52 52 0 2 0 1 0 1 0 4 4 0 0 0 0 3 2 1 0 0 0 7 4 0 1 1 1 59 42 1 3 22 5 9 7 1 1 1 0 0 0 1 0 1 0 0 LQ2 7 5 2 1 5 1 3 1 2 0 178 176 138 9 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 0 119 101 30 40 9 8 74 74 0 2 2 0 0 0 0 8 5 2 2 0 0 6 5 1 0 0 0 12 9 0 3 0 0 79 53 0 3 31 5 11 8 2 2 1 0 0 0 5 3 0 2 0 LQ1 CUISINE 21 Thai 17 MISS 11 1 32 31 3 14 4 16 Tibetan 12 MISS 81 52 180 Turkish 180 MISS 165 1 31 2 23 1 Vegan 3 MISS 11 32 63 0 Vegetarian 4 MISS 31 32 33 04 1 Venezuelan 3 MISS 11 12 23 5 Vietnamese 4 MISS 11 32 13 24 0 Fast Food 2 MISS 161 1 139 2 88 4 104 Coffeehouse 42 MISS 33 1 107 2 107 3 2 Pan‐Asian & Pacific Rim 17 MISS 61 12 2 63 14 1 Family Fare 67 MISS 58 1 28 2 83 2 Cheesesteak 3 MISS 33 1 21 3 9 Chowder 9 MISS 41 12 37 3 30 4 8 Ice Cream 13 MISS 11 1 32 147 Bagels 126 MISS 11 1 22 2 93 Donuts 41 MISS 47 1 33 Juices & Smoothies 12 MISS 17 1 10 9 8 1 24 12 6 15 4 LQ4 LQ3 LQ2 LQ1 47 72 91 130 46 71 86 128 5 5 10 36 0 1 7 17 0 0 0 2 0 0 0 3 0 1 0 2 0 1 0 0 0 0 0 1 0 0 0 1 0 0 0 7 0 0 0 4 0 0 0 4 0 0 0 2 0 0 0 1 3 3 1 22 1 0 1 9 2 1 0 19 0 2 0 7 0 0 0 3 12 16 31 73 10 10 24 62 4 8 7 40 3 2 7 25 2 1 0 8 0 0 0 3 0 0 0 4 0 0 0 1 0 0 0 1 0 0 0 2 0 0 0 2 12 26 35 87 9 22 30 85 2 3 6 26 1 3 3 16 0 0 1 4 0 0 0 5 160 168 178 178 96 128 158 173 138 142 168 173 2 4 3 29 0 0 0 1 54 81 115 143 12 16 28 70 53 77 112 139 0 0 1 9 0 0 0 2 9 11 14 39 3 5 9 22 2 3 1 16 4 2 1 20 0 1 3 10 1 2 2 17 46 67 100 127 14 31 44 93 26 39 69 101 7 15 34 66 0 0 1 1 3 2 1 13 2 1 0 7 1 1 1 6 0 0 0 1 0 0 2 4 0 0 1 2 0 0 1 2 0 0 0 1 0 0 1 1 0 0 0 2 58 87 118 154 14 19 28 66 51 80 110 150 0 0 1 2 12 11 32 65 2 2 8 33 10 9 24 46 0 0 0 1 9 5 10 37 7 5 10 37 2 0 0 5 2 9 12 35 0 2 5 25 2 7 8 17
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