The Dynamics of City Formation: Finance and Governance
This Paper examines city formation in a country whose urban population is growing steadily over time, with new cities required to accommodate this growth. In contrast to most of the literature there is immobility of housing and urban infrastructure, and investment in these assets is taken on the basis of forward-looking behaviour. In the presence of these fixed assets cities form sequentially, without the population swings in existing cities that arise in current models. Equilibrium city size, absent government, may be larger or smaller than is efficient, depending on how urban externalities vary with population. Efficient formation of cities involves local government borrowing to finance development. The institutions governing land markets, leases, local taxation, and local borrowing and debt affect the efficiency of outcomes. The Paper explores the effects of different fiscal constraints, and shows that borrowing constraints lead cities to be larger than is efficient.
|Date of creation:||Sep 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:4638. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.