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Formation of Hub Cities: Transportation Cost Advantage and Population Agglomeration

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  • Konishi, Hideo

Abstract

Many cities are located on rivers or coasts. This paper argues that such cities developed as transportation hubs or markets for interregional trade, since these locations provide better access (lower marginal transportation costs) to other regions. Local products are collected at such hubs, and interregional trade then takes place among these transportation hubs. As the volume of trade between hubs increases, more workers are needed in order to meet labor demand for shipping and handling commodities, resulting in population agglomeration at such hubs. This paper constructs a simple three location-identical consumer model, in which transportation hub and population agglomeration emerge endogenously. In contrast with much of the literature on city formation, we introduce no economies of scale into the model. Markets are assumed to be perfectly competitive and complete. Since prices are determined in equilibrium, transportation costs and routes are simultaneously determined in the system. Population agglomeration occurs solely because of location-specific production technologies (which generates gains from trade) and the differences in transportation technologies among locations (which determines the transportation routes). It is shown that a hub city emerges when transportation technologies are heterogeneous enough.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 48 (2000)
Issue (Month): 1 (July)
Pages: 1-28

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Handle: RePEc:eee:juecon:v:48:y:2000:i:1:p:1-28

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Web page: http://www.elsevier.com/locate/inca/622905

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  1. Abdel-Rahman, H. M., 1988. "Product differentiation, monopolistic competition and city size," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 69-86, February.
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Cited by:
  1. repec:ebl:ecbull:v:18:y:2002:i:1:p:1-11 is not listed on IDEAS
  2. Cuberes, David, 2008. "A Model of Sequential City Growth," MPRA Paper 8431, University Library of Munich, Germany.
  3. Cuberes, David, 2007. "A Model of Sequential City Growth," MPRA Paper 2172, University Library of Munich, Germany.
  4. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc.
  5. Daniel P. McMillen, 2003. "Employment subcenters in Chicago: past, present, and future," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 2-14.
  6. Sukkoo Kim, 2002. "The Reconstruction of the American Urban Landscape in the Twentieth Century," NBER Working Papers 8857, National Bureau of Economic Research, Inc.
  7. Munetomo Ando & Daisuke Oyama, 2002. "A model of a spatial economy with trading posts," Economics Bulletin, AccessEcon, vol. 18(1), pages 1-11.
  8. McMillen, Daniel P. & Smith, Stefani C., 2003. "The number of subcenters in large urban areas," Journal of Urban Economics, Elsevier, vol. 53(3), pages 321-338, May.

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