Intergenerational Decision on Education and Migration within a Family in a Spatial Agglomeration Model

This study examines how urban agglomeration is influenced by both family public goods, which has the advantage of proximity within a family, and human capital, which increases productivity with increasing proximity of residents within a city. In some cases, proximity advantages reinforce agglomeration forces, while in others, they work in the opposite direction and weaken them. When proximity advantages exist among family members, urban population density increases beyond what exists without such advantages. This situation discourages further migration of unskilled workers from more distant regions, thereby considerably dividing society. In these regions, families perpetually remain in the regions as unskilled workers, with lower substantial incomes. The analytical framework and findings of this study provide an important basis for evaluating several important policies. First, the model exhibits multiple human capital agglomeration patterns: a monocentric equilibrium and polycentric urban structure with multiple core cities. Among them, the polycentric equilibrium enhances overall economic welfare and mitigates persistent social disparities across regions and generations. Thus, Japan should promote such an urban structure by expanding the geographical and administrative scope of local governments, as proposed by the doshusei reform. Second, the study examines the impacts of social security systems that provide family public goods to the elderly. The fact that this also mitigates social gap by encouraging parents to invest more in their children’s education is also demonstrated in the study.