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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. Elise Brezis & Paul Krugman, 1993. "Technology and the Life Cycle of Cities," NBER Working Papers 4561, National Bureau of Economic Research, Inc.
    2. Gilles Duranton, 2002. "City Size Distributions As A Consequence of the Growth Process," CEP Discussion Papers, Centre for Economic Performance, LSE dp0550, Centre for Economic Performance, LSE.
    3. Yannis Menelaos Ioannides & Henry G. Overman, 2003. "Zipf’s law for cities : an empirical examination," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 583, London School of Economics and Political Science, LSE Library.
    4. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 739-767, August.
    5. Esteban Rossi-Hansberg & Mark L. J. Wright, 2003. "Urban structure and growth," Discussion Paper / Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis 141, Federal Reserve Bank of Minneapolis.
    6. Soo, Kwok Tong, 2005. "Zipf's Law for cities: a cross-country investigation," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 35(3), pages 239-263, May.
    7. Konishi, Hideo, 2000. "Formation of Hub Cities: Transportation Cost Advantage and Population Agglomeration," Journal of Urban Economics, Elsevier, vol. 48(1), pages 1-28, July.
    8. Edward L. Glaeser & Jose A. Scheinkman & Andrei Shleifer, 1995. "Economic Growth in a Cross-Section of Cities," NBER Working Papers 5013, National Bureau of Economic Research, Inc.
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    11. Jonathan Eaton & Zvi Eckstein, 1994. "Cities and Growth: Theory and Evidence from France and Japan," NBER Working Papers 4612, National Bureau of Economic Research, Inc.
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    13. Xavier Gabaix, 1999. "Zipf's Law and the Growth of Cities," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 129-132, May.
    14. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    15. Robert Tamura, 2004. "Human capital and economic development," Working Paper, Federal Reserve Bank of Atlanta 2004-34, Federal Reserve Bank of Atlanta.
    16. J.V. Henderson, 1972. "The Sizes and Types of Cities," Working Papers, Queen's University, Department of Economics 75, Queen's University, Department of Economics.
    17. 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.
    18. Tamura, Robert, 2002. "Human capital and the switch from agriculture to industry," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 27(2), pages 207-242, December.
    19. Wang, Ping, 1993. "Agglomeration in a linear city with heterogeneous households," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 23(2), pages 291-306, April.
    20. Jan Eeckhout, 2004. "Gibrat's Law for (All) Cities," American Economic Review, American Economic Association, American Economic Association, vol. 94(5), pages 1429-1451, December.
    21. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers, Princeton, Woodrow Wilson School - Public and International Affairs 148, Princeton, Woodrow Wilson School - Public and International Affairs.
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