The price of decentralisation
AbstractThis paper develops a model for analysing problems related to centralisation and decentralisation. The model is of the new economic geography type, in which there are agglomeration gains in cities but not in rural areas. These gains are counteracted by residential preferences. We show that, even though people have preferences for rural living, an unregulated market economy gives too little centralisation. This result holds even when city governments actively pursue policies to attract economic activities in order to make their city bigger. When allowing for cities of unequal size, a likely outcome is that big cities and rural areas will be overpopulated whereas smaller cities will be too few and too small.
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Bibliographic InfoPaper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 16/2010.
Length: 49 pages
Date of creation: 17 Aug 2010
Date of revision:
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Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 959 277
Fax: 5595 9100
Web page: http://www.nhh.no/sam/
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Number of cities; size of cities; external economies; local public inputs; regional competition; agglomeration; welfare.;
Find related papers by JEL classification:
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- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-14 (All new papers)
- NEP-GEO-2011-05-14 (Economic Geography)
- NEP-URE-2011-05-14 (Urban & Real Estate Economics)
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