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A Model of Sequential City Growth

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  • Cuberes, David
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    Abstract

    There is strong evidence showing that in most countries cities develop sequentially, with the initially largest city being the first to grow. This paper presents a growth model of optimal city size that rationalizes this particular growth pattern. Increasing returns to scale is the force that favors agglomeration of resources in a city, and convex costs associated with the stock of installed capital represent the congestion force that limits city size. The key to generate sequential growth is the assumption of irreversible investment in physical capital. The presence of a positive external effect of aggregate city capital on individual firms makes the competitive equilibrium inefficient.

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    File URL: http://mpra.ub.uni-muenchen.de/2172/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2172.

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    Date of creation: 16 Feb 2007
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    Handle: RePEc:pra:mprapa:2172

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    Keywords: cities; Gibrat's law; increasing returns; congestion costs;

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    1. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Urban structure and growth," Staff Report 381, Federal Reserve Bank of Minneapolis.
    2. 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.
    3. Jan Eeckhout, 2004. "Gibrat's Law for (All) Cities," American Economic Review, American Economic Association, vol. 94(5), pages 1429-1451, December.
    4. Hideo Konishi, 1999. "Formation of Hub Cities: Transportation Cost Advantage and Population Agglomeration," Boston College Working Papers in Economics 448, Boston College Department of Economics.
    5. Tamura, Robert, 2002. "Human capital and the switch from agriculture to industry," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 207-242, December.
    6. Glaeser, E.L. & Scheinkman, J.A., 1993. "Economic Growth in a Cross-Section of Cities," Harvard Institute of Economic Research Working Papers 1645, Harvard - Institute of Economic Research.
    7. Wang, P., 1989. "Agglomeration In A Linear City With Heterogeneous Households," Papers 9-89-3, Pennsylvania State - Department of Economics.
    8. Brezis, Elise S & Krugman, Paul R, 1997. " Technology and the Life Cycle of Cities," Journal of Economic Growth, Springer, vol. 2(4), pages 369-83, December.
    9. Jonathan Eaton & Zvi Eckstein, 1994. "Cities and Growth: Theory and Evidence from france and Japan," Boston University - Institute for Economic Development 36, Boston University, Institute for Economic Development.
    10. Yannis Menelaos Ioannides & Henry G. Overman, 2003. "Zipf’s law for cities : an empirical examination," LSE Research Online Documents on Economics 583, London School of Economics and Political Science, LSE Library.
    11. Tamura, Robert, 2006. "Human capital and economic development," Journal of Development Economics, Elsevier, vol. 79(1), pages 26-72, February.
    12. Duranton, Gilles, 2002. "City Size Distributions as a Consequence of the Growth Process," CEPR Discussion Papers 3577, C.E.P.R. Discussion Papers.
    13. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-56, September.
    14. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
    15. Rosen, Kenneth T. & Resnick, Mitchel, 1980. "The size distribution of cities: An examination of the Pareto law and primacy," Journal of Urban Economics, Elsevier, vol. 8(2), pages 165-186, September.
    16. J.V. Henderson & A.J. Venables, 2006. "The Dynamics of City Formation: Finance and Governance," 2006 Meeting Papers 224, Society for Economic Dynamics.
    17. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    18. Xavier Gabaix, 1999. "Zipf's Law and the Growth of Cities," American Economic Review, American Economic Association, vol. 89(2), pages 129-132, May.
    19. Wang, Ping, 1990. "Competitive equilibrium formation of marketplaces with heterogeneous consumers," Regional Science and Urban Economics, Elsevier, vol. 20(3), pages 295-304, November.
    20. repec:fth:stanho:e-95-4 is not listed on IDEAS
    21. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
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