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Some Evidence on the Nature of Urbanization Economies

Author

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  • Krupka, Douglas J.

    (University of Michigan)

Abstract

Urbanization economies – the effects on productivity and utility created endogenously by larger cities – are a fundamental component of both the economic geography of modern societies and the perpetuation of innovation and economic growth at a national level. Cities account for vast majorities of population – and even larger proportions of production and innovation – in all advanced economies. The nature of these endogenous effects of city size is thus of considerable importance. Krupka (2008) presents a general model in which exogenous variation in local productivity ("natural advantage") and development constraints generate covariation in local incomes, housing prices and population. In that model, the strength of the correlation amongst these variables depends on the nature of the dominant urbanization economy (or diseconomy). This paper looks at the data over the last several decades and finds that the data is consistent with city size increasing consumer/resident happiness and/or reducing productivity of employers.

Suggested Citation

  • Krupka, Douglas J., 2009. "Some Evidence on the Nature of Urbanization Economies," IZA Discussion Papers 4573, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4573
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    References listed on IDEAS

    as
    1. Rappaport, Jordan, 2008. "A productivity model of city crowdedness," Journal of Urban Economics, Elsevier, vol. 63(2), pages 715-722, March.
    2. Krupka, Douglas J., 2008. "On Amenities, Natural Advantage and Agglomeration," IZA Discussion Papers 3598, Institute of Labor Economics (IZA).
    3. Alberto Dalmazzo & Guido de Blasio, 2011. "Amenities and skill‐biased agglomeration effects: Some results on Italian cities," Papers in Regional Science, Wiley Blackwell, vol. 90(3), pages 503-527, August.
    4. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117, Elsevier.
    5. Rappaport, Jordan, 2008. "Consumption amenities and city population density," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 533-552, November.
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    More about this item

    Keywords

    agglomeration; urbanization economies; congestion; regional equilibrium; natural advantage; economic geography;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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