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Dynamics of city formation

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Author Info

  • Vernon Henderson

    (Brown University)

  • Anthony Venables

    (Oxford University)

Abstract

This paper examines city formation in a country whose urban population is growing steadily over time, with new cities required to accommodate this growth. In contrast to most of the literature there is immobility of housing and urban infrastructure, and investment in these assets is taken on the basis of forward-looking behavior. In the presence of these fixed assets cities form sequentially, without the population swings in existing cities that arise in current models, but with swings in house rents. Equilibrium city size, absent government, may be larger or smaller than is efficient, depending on how urban externalities vary with population. Efficient formation of cities with internalization of externalities involves local government intervention and borrowing to finance development. The paper explores the institutions required for successful local government intervention. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2008.06.003
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 12 (2009)
Issue (Month): 2 (April)
Pages: 233-254
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:red:issued:08-51

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Related research

Keywords: Urbanization; City size; Urban developers; City governance;

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References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Duncan Black & Vernon Henderson, 2003. "Urban evolution in the USA," Journal of Economic Geography, Oxford University Press, vol. 3(4), pages 343-372, October.
  2. Duffie, Darrell, et al, 1994. "Stationary Markov Equilibria," Econometrica, Econometric Society, vol. 62(4), pages 745-81, July.
  3. Esteban Rossi-Hansberg & Mark L. J. Wright, 2003. "Urban structure and growth," Discussion Paper / Institute for Empirical Macroeconomics 141, Federal Reserve Bank of Minneapolis.
  4. Anthony J. Venables, 2003. "Spatial Disparities in Developing Countries: Cities, Regions and International Trade," CEP Discussion Papers dp0593, Centre for Economic Performance, LSE.
  5. Abdel-Rahman, Hesham M. & Anas, Alex, 2004. "Theories of systems of cities," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 52, pages 2293-2339 Elsevier.
  6. Xavier Gabaix & Yannis M. Ioannides, 2003. "The Evolution of City Size Distributions," Discussion Papers Series, Department of Economics, Tufts University 0310, Department of Economics, Tufts University.
  7. Michael Greenstone & Enrico Moretti, 2003. "Bidding for Industrial Plants: Does Winning a 'Million Dollar Plant' Increase Welfare?," NBER Working Papers 9844, National Bureau of Economic Research, Inc.
  8. Edward L. Glaeser & Joseph Gyourko, 2001. "Urban Decline and Durable Housing," NBER Working Papers 8598, National Bureau of Economic Research, Inc.
  9. Krugman, Paul, 1996. "Confronting the Mystery of Urban Hierarchy," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 399-418, December.
  10. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
  11. repec:cdl:ucscec:33534 is not listed on IDEAS
  12. Henderson, J. Vernon & Wang, Hyoung Gun, 2007. "Urbanization and city growth: The role of institutions," Regional Science and Urban Economics, Elsevier, vol. 37(3), pages 283-313, May.
  13. J. Vernon Henderson & Anthony Venables, 2008. "The Dynamics of City Formation," NBER Working Papers 13769, National Bureau of Economic Research, Inc.
  14. James E. Rauch, 1993. "Does History Matter Only When it Matters Little? The Case of City-Indu try Location," NBER Working Papers 4312, National Bureau of Economic Research, Inc.
  15. Duncan Black & Vernon Henderson, 1999. "A Theory of Urban Growth," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 252-284, April.
  16. Helsley, Robert W. & Strange, William C., 1994. "City formation with commitment," Regional Science and Urban Economics, Elsevier, vol. 24(3), pages 373-390, June.
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Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
Cited by:
  1. Duranton, Gilles, 2008. "From Cities to Productivity and Growth in Developing Countries," CEPR Discussion Papers 6634, C.E.P.R. Discussion Papers.
  2. Klaus Desmet & Esteban Rossi-Hansberg, 2007. "Spatial Growth and Industry Age," NBER Working Papers 13302, National Bureau of Economic Research, Inc.
  3. Cuberes, David, 2008. "A Model of Sequential City Growth," MPRA Paper 8431, University Library of Munich, Germany.
  4. Gene M. Grossman & Esteban Rossi-Hansberg, 2010. "External Economies and International Trade Redux," The Quarterly Journal of Economics, MIT Press, vol. 125(2), pages 829-858, May.
  5. Michaels, Guy & Rauch, Ferdinand & Redding, Stephen J, 2008. "Urbanization and Structural Transformation," CEPR Discussion Papers 7016, C.E.P.R. Discussion Papers.
  6. González-Val, Rafael & Lanaspa, Luis, 2011. "Patterns in US urban growth (1790–2000)," MPRA Paper 31006, University Library of Munich, Germany.
  7. Wouter Vermeulen, 2011. "Agglomeration Externalities and Urban Growth Controls," CPB Discussion Paper 191, CPB Netherlands Bureau for Economic Policy Analysis.
  8. Ailenei Dorel & Mosora Liviu - Cosmin, 2011. "Local Action Groups - The European Integration Catalyst For The Romanian Rural Area," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 40-46, July.
  9. Behrens, Kristian & Duranton, Gilles & Robert-Nicoud, Frédéric, 2010. "Productive cities: Sorting, selection and agglomeration," CEPR Discussion Papers 7922, C.E.P.R. Discussion Papers.
  10. Wouter Vermeulen, 2011. "Agglomeration Externalities and Urban Growth Controls," SERC Discussion Papers 0093, Spatial Economics Research Centre, LSE.
  11. Ailenei Dorel & Mosora Cosmin, 2011. "Local Action Groups - a possible solution to the rural problem of Romania," ERSA conference papers ersa11p1136, European Regional Science Association.

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