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Optimal Formation of Cities: Policy Considerations

Author

Listed:
  • Hannu Laurila

    (School of Management, University of Tampere)

Abstract

Club theoretic analysis of migration between profoundly asymmetric cities shows that centralizedpolicy intervention is necessary to ensure efficient allocation of people between cities. Quantity rationingand equalizing lump sum transfers are compared as the policy instruments of the central government. Theinstruments turn out to be different in their effects on residential allocation and welfare. This is becauselump sum transfers pool up the welfare creating potentials of the cities thus affecting the optimalitycondition. Therefore, lump sum transfers are superior, and they accelerate rather than stabilize the spatialevolution.

Suggested Citation

  • Hannu Laurila, 2007. "Optimal Formation of Cities: Policy Considerations," Working Papers 0758, Tampere University, Faculty of Management and Business, Economics.
    • Handle: RePEc:tam:wpaper:0758
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    File URL: http://urn.fi/urn:isbn:978-951-44-70-43-1
    File Function: First version, 2007
    Download Restriction: no
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    More about this item

    Keywords

    agglomeration economies; city size; club theory;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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