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Urban growth and its aggregate implications

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  • Duranton, Gilles
  • Puga, Diego

Abstract

We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogenous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains. The model builds on strong microfoundations, matches key regularities at the city and economy-wide levels, and generates novel predictions for which we provide evidence. It can be quantified relying on few parameters, provides a basis to estimate the main ones, and remains transparent regarding its mechanisms. We examine various counterfactuals to assess quantitatively the effect of cities on economic growth and aggregate income.

Suggested Citation

  • Duranton, Gilles & Puga, Diego, 2019. "Urban growth and its aggregate implications," CEPR Discussion Papers 14215, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14215
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    More about this item

    Keywords

    agglomeration economies; city size distributions; planning regulations; Urban costs; urban growth;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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