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Agglomeration Economies, Division of Labour and the Urban Land‐rent Escalation: A General Equilibrium Analysis of Urbanisation

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  • Guang‐Zhen Sun
  • Xiaokai Yang

Abstract

A general equilibrium model with increasing return to labour specialisation and economies of transaction agglomeration is developed to address the residential land‐rent escalation associated with the urbanisation process, which is in turn endogenised as a result of the evolution of the division of labour. The interplay among the geographical pattern of transactions, trading efficiency and the network size of the division of labour plays a crucial role in our story of urbanisation. We show that: as transaction conditions are improved, the equilibrium level of division of labour and individuals specialisation levels increase; the urban land‐rent increases absolutely as well as relative to that in the rural area, the relative per capita lot size of residence in the urban and rural areas decreases; the diversity of occupations in the urban area and the population share of urban residents increase; and the productivity of all goods and per capital real income increase.

Suggested Citation

  • Guang‐Zhen Sun & Xiaokai Yang, 2002. "Agglomeration Economies, Division of Labour and the Urban Land‐rent Escalation: A General Equilibrium Analysis of Urbanisation," Australian Economic Papers, Wiley Blackwell, vol. 41(2), pages 164-184, June.
    • Handle: RePEc:bla:ausecp:v:41:y:2002:i:2:p:164-184
    DOI: 10.1111/1467-8454.00157
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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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