The Growing Economic Specialization of Cities: Disentangling Industrial and Functional Dimensions in the Canadian Urban System, 1971-2006

Decreasing spatial transaction and trade costs have given rise to growing economic specialization of cities. While most studies focus on industries as the primary manifestation of urban specialization, a growing body of literature examines occupational functions, i.e., activities and tasks performed within a given industry or firm. This paper explores how the two dimensions (industries and functions) interact across the urban system and their relative importance over time. Is there a trend toward increasing functional specialization in the Canadian urban system? How much of this phenomenon is attributable to spatial shifts in regional industrial structures as opposed to spatial divisions within industries? The paper uses a unique data set drawn from Statistics Canada Census microdata files between 1971 and 2006. Based on the employed population, the data are spatially organized and cross-tabulated over industries and occupational groups. A decomposition methodology is used to compare the relative weights of industry and regional (functional) effects in accounting for the changing spatial division of functions across Canadian urban areas. Clear patterns of increasing functional specialization are found within the Canadian urban system. Regional effects are generally greater than industry effects, suggesting that spatial divisions of functions (spatial shifts within industries) are progressing more rapidly than regional shifts in industrial structure.