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Vanishing Cities: What Does the New Economic Geography Imply About the Efficiency of Urbanization?

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  • Alex Anas

    (State University of New York at Buffalo)

Abstract

How should the size and number of cities evolve optimally as population grows? Stripped of the constraints of geography itself, the setup of the New Economic Geography implies that de-agglomeration (or de- urbanization) is efficient. The number of cities increases while the size of each decreases on the optimal path until the economy suddenly disperses to tiny towns of stand-alone firms each specializing in a unique good. The cause of this narrow result is the NEG’s strong emphasis on intercity trade to satisfy the taste for more goods. For the same aggregate population, a system of smaller cities saves time lost in commuting, has a larger labor supply and makes more goods than does a system of larger cities. Falling interurban trading costs favor this de- urbanization process. Only if intraurban commuting costs fall sufficiently, can a pattern of growing city sizes be efficient with growing population. Of course, when the number of cities or the geographic space itself is limited or asymmetric, then agglomeration can arise as an artifact of the constraints imposed by geography as demonstrated by numerous NEG models. This reveals that the central agglomerative force in the NEG is space itself and not the underlying economic relations.

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Bibliographic Info

Paper provided by EconWPA in its series Urban/Regional with number 0302005.

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Date of creation: 14 Feb 2003
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Handle: RePEc:wpa:wuwpur:0302005

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  1. Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
  2. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
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  7. Abdel-Rahman, Hesham M., 1996. "When do cities specialize in production?," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 1-22, February.
  8. Anas, Alex & Xiong, Kai, 2003. "Intercity trade and the industrial diversification of cities," Journal of Urban Economics, Elsevier, vol. 54(2), pages 258-276, September.
  9. Fujita, Masahisa & Krugman, Paul & Mori, Tomoya, 1999. "On the evolution of hierarchical urban systems1," European Economic Review, Elsevier, vol. 43(2), pages 209-251, February.
  10. Moomaw, Ronald L, 1981. "Productivity and City Size? A Critique of the Evidence [Are There Returns to Scale in City Size?]. [Bias in the Cross Section Estimates of the Elasticity of Substitution]," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 675-88, November.
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Cited by:
  1. Berliant, Marcus & Yu, Chia-Ming, 2009. "Rational expectations in urban economics," MPRA Paper 12709, University Library of Munich, Germany.
  2. Stefan Gruber, 2010. "To Migrate or to Commute?," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 2(1), pages 110-134, January.
  3. 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.
  4. MURATA, Yasudada & THISSE, Jacques-François, 2005. "A simple model of economic geography à la Helpman-Tabuchi," CORE Discussion Papers 2005017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. PICARD, Pierre & TABUCHI, Takatoshi, 2003. "Natural agglomeration," CORE Discussion Papers 2003101, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. PICARD, Pierre M. & TABUCHI, Takatoshi, . "Self-organized agglomerations and transport costs," CORE Discussion Papers RP -2182, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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