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Intercity Trade and the Industrial Diversification of Cities

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Author Info

  • Alex Anas

    (State University of New York at Buffalo)

  • Kai Xiong

    (The Chase Manhattan Bank)

Abstract

The industrial diversification of cities is explained without imposing linkages among industries. In each of two city-industries, a manufacture is produced competitively as the final good using labor and industry- specific differentiated services. Manufacturers import the services of their industry from all cities that produce them, since their technology favors variety. In specialized cities, the city-industry is large and many services are locally available but the two manufactures have to be traded among cities. In diversified cities the two manufactures are produced in the same city, and each industry crowds out half the local services of the other, but manufactures need not be imported. A lower cost of trading manufactures (e.g. railroads and intercity highways) favors a system of specialized cities, while a lower cost of trading services (e.g. telephone, the Internet) favors a system of diversified cities since the latter cities rely more on imported services, having fewer locally. A larger cost-share of services favors specialization, and high intracity commuting cost and population growth favor diversification.

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Bibliographic Info

Paper provided by EconWPA in its series Urban/Regional with number 0302003.

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Date of creation: 14 Feb 2003
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Handle: RePEc:wpa:wuwpur:0302003

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Keywords: Trade; diversification; specialization; city systems;

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References

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  1. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  2. Rivera-Batiz, Francisco L., 1988. "Increasing returns, monopolistic competition, and agglomeration economies in consumption and production," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 125-153, February.
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  4. Abdel-Rahman, Hesham M., 1996. "When do cities specialize in production?," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 1-22, February.
  5. Anas, Alex, 1992. "On the birth and growth of cities: : Laissez-faire and planning compared," Regional Science and Urban Economics, Elsevier, vol. 22(2), pages 243-258, June.
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  7. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  8. Abdel-Rahman, H. M., 1988. "Product differentiation, monopolistic competition and city size," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 69-86, February.
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  12. repec:fth:stanho:e-95-4 is not listed on IDEAS
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Citations

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Cited by:
  1. Ho Yeon KIM & Petra de Jong & Jan Rouwendal & Aleid Brouwer, 2012. "Shrinking population and the urban hierarchy
    [Housing preferences and attribute importance among Dutch older adults: a conjoint choice experiment]
    ," ERSA conference papers ersa12p350, European Regional Science Association.
  2. Berliant, Marcus & Yu, Chia-Ming, 2009. "Rational expectations in urban economics," MPRA Paper 17327, University Library of Munich, Germany.
  3. Kim, Ho Yeon, 2012. "Shrinking population and the urban hierarchy," IDE Discussion Papers 360, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  4. Yannis M. Ioannides, 2008. "Intercity Trade and Convergent versus Divergent Urban Growth," Discussion Papers Series, Department of Economics, Tufts University 0723, Department of Economics, Tufts University.
  5. Hajime Takatsuka & Dao-Zhi Zeng, 2013. "Industrial configuration in an economy with low transportation costs," The Annals of Regional Science, Springer, vol. 51(2), pages 593-620, October.
  6. Simon Firestone, 2010. "Diverse cities and knowledge spillovers," The Annals of Regional Science, Springer, vol. 44(1), pages 1-20, February.
  7. Marcus Berliant & Ping Wang, 2005. "Urban Growth and Subcenter Formation: A Trolley Ride from the Staples Center to Disneyland and the Rose Bowl," Urban/Regional 0511012, EconWPA.
  8. Alex Anas, 2003. "Vanishing Cities: What Does the New Economic Geography Imply About the Efficiency of Urbanization?," Urban/Regional 0302005, EconWPA.
  9. Anas, Alex & Xiong, Kai, 2005. "The formation and growth of specialized cities: efficiency without developers or Malthusian traps," Regional Science and Urban Economics, Elsevier, vol. 35(4), pages 445-470, July.
  10. Diaz-Lanchas, Jorge & Llano, Carlos & Zofío, José Luis, 2013. "Trade margins, transport cost thresholds and market areas: Municipal freight flows and urban hierarchy," Working Papers in Economic Theory 2013/10, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  11. Massimo Del Gatto, 2004. "Agglomeration, Integration, and Territorial Authority Scale in a System of Trading Cities. Centralisation versus Devolution," Working Papers 2004.93, Fondazione Eni Enrico Mattei.
  12. Sorek, Gilad, 2009. "Migration costs, commuting costs and intercity population sorting," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 377-385, July.

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