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Growth in a cross-section of cities: location, increasing returns or random growth?

Listed author(s):
  • Rafael González-Val

    ()

    (Universitat de Barcelona & IEB)

  • Jose Olmo

    ()

    (Centro Universitario de la Defensa & City University London)

This article analyzes empirically the main existing theories on income and population city growth: increasing returns to scale, locational fundamentals and random growth. To do this we implement a threshold nonlinearity test that extends standard linear growth regression models to a dataset on urban, climatological and macroeconomic variables on 1,175 U.S. cities. Our analysis reveals the existence of increasing returns when per-capita income levels are beyond $19; 264. Despite this, income growth is mostly explained by social and locational fundamentals. Population growth also exhibits two distinct equilibria determined by a threshold value of 116,300 inhabitants beyond which city population grows at a higher rate. Income and population growth do not go hand in hand, implying an optimal level of population beyond which income growth stagnates or deteriorates.

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File URL: http://www.ieb.ub.edu/aplicacio/fitxers/2011/12/Doc2011-39.pdf
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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2011/39.

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Length: 38 pages
Date of creation: 2011
Handle: RePEc:ieb:wpaper:2011/12/doc2011-39
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