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Survival of the Fittest in Cities: Urbanisation and Inequality

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  • Kristian Behrens
  • Frédéric Robert‐Nicoud

Abstract

We develop a framework that integrates natural advantage, agglomeration economies, and firm selection to explain why large cities are both more productive and more unequal than small towns. Our model highlights interesting complementarities among those factors and it matches a number of key stylised facts about cities. A larger city size increases productivity via a selection process, and higher urban productivity provides incentives for rural-urban migration. Tougher selection increases both the returns to skills and earnings inequality in cities. We numerically illustrate a multi-city version of the model and explore the formation of new cities, the growth of existing cities, and changes in income inequality.
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  • Kristian Behrens & Frédéric Robert‐Nicoud, 2014. "Survival of the Fittest in Cities: Urbanisation and Inequality," Economic Journal, Royal Economic Society, vol. 124(581), pages 1371-1400, December.
  • Handle: RePEc:wly:econjl:v:124:y:2014:i:581:p:1371-1400
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    File URL: http://hdl.handle.net/10.1111/ecoj.2014.124.issue-581
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    Cited by:

    1. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, Elsevier.
    2. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, Elsevier.
    3. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    4. Moser, Mathias & Schnetzer, Matthias, 2014. "The Geography of Average Income and Inequality: Spatial Evidence from Austria," Department of Economics Working Paper Series 4349, WU Vienna University of Economics and Business.
    5. Behrens, Kristian & Pokrovsky, Dmitry & Zhelobodko, Evgeny, 2014. "Market Size, Entrepreneurship, and Income Inequality," CEPR Discussion Papers 9831, C.E.P.R. Discussion Papers.
    6. Gentilini,Ugo, 2015. "Entering the city : emerging evidence and practices with safety nets in urban areas," Social Protection and Labor Policy and Technical Notes 98253, The World Bank.
    7. Chhy, Niroth, 2016. "The Rise of the Working Rich, Market Imperfections, and Income Inequality," MPRA Paper 75373, University Library of Munich, Germany.
    8. Johansson, Anders C. & Wang, Xun, 2014. "Financial sector policies and income inequality," China Economic Review, Elsevier, vol. 31(C), pages 367-378.
    9. David Castells-Quintana & Raul Ramos & Vicente Royuela, 2015. "Income inequality in European Regions: Recent trends and determinants," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 35(2), pages 123-146, October.
    10. Cardoso, Rodrigo V. & Meijers, Evert J. & van Ham, Maarten & Burger, Martijn J. & de Vos, Duco, 2017. "The City as a Self-Help Book: The Psychology of Urban Promises," IZA Discussion Papers 10693, Institute for the Study of Labor (IZA).
    11. Chen, Anping & Dai, Tianshi & Partridge, Mark, 2017. "Agglomeration and Firm Wage Inequality: Evidence from China," MPRA Paper 83516, University Library of Munich, Germany.

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