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A Model of Sequential City Growth

  • Cuberes, David
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    There is strong evidence showing that in most countries cities develop sequentially, with the initially largest city being the first to grow. This paper presents a growth model of optimal city size that rationalizes this particular growth pattern. Increasing returns to scale is the force that favors agglomeration of resources in a city, and convex costs associated with the stock of installed capital represent the congestion force that limits city size. The key to generate sequential growth is the assumption of irreversible investment in physical capital. The presence of a positive external effect of aggregate city capital on individual firms makes the competitive equilibrium inefficient.

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    File URL: https://mpra.ub.uni-muenchen.de/2172/1/MPRA_paper_2172.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2172.

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    Date of creation: 16 Feb 2007
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    Handle: RePEc:pra:mprapa:2172
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    1. Kwok Tong Soo, 2004. "Zipf's law for cities: a cross country investigation," LSE Research Online Documents on Economics 19947, London School of Economics and Political Science, LSE Library.
    2. Xavier Gabaix, 1999. "Zipf's Law for Cities: An Explanation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 739-767.
    3. Eaton, Jonathan & Eckstein, Zvi, 1997. "Cities and growth: Theory and evidence from France and Japan," Regional Science and Urban Economics, Elsevier, vol. 27(4-5), pages 443-474, August.
    4. Robert Tamura, 2002. "Human capital and economic development," FRB Atlanta Working Paper 2002-5, Federal Reserve Bank of Atlanta.
    5. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Urban structure and growth," Staff Report 381, Federal Reserve Bank of Minneapolis.
    6. Hideo Konishi, 1999. "Formation of Hub Cities: Transportation Cost Advantage and Population Agglomeration," Boston College Working Papers in Economics 448, Boston College Department of Economics.
    7. Wang, P., 1993. "Agglomeration in a Linear City with Heterogeneous Households," Papers 9-91-10, Pennsylvania State - Department of Economics.
    8. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    9. Henderson, J Vernon & Venables, Anthony J, 2004. "The Dynamics of City Formation: Finance and Governance," CEPR Discussion Papers 4638, C.E.P.R. Discussion Papers.
    10. Rosen, Kenneth T. & Resnick, Mitchel, 1980. "The size distribution of cities: An examination of the Pareto law and primacy," Journal of Urban Economics, Elsevier, vol. 8(2), pages 165-186, September.
    11. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
    12. Brezis, Elise S & Krugman, Paul R, 1997. "Technology and the Life Cycle of Cities," Journal of Economic Growth, Springer, vol. 2(4), pages 369-83, December.
    13. Jan Eeckhout, 2004. "Gibrat's Law for (All) Cities," American Economic Review, American Economic Association, vol. 94(5), pages 1429-1451, December.
    14. Edward L. Glaeser & Jose A. Scheinkman & Andrei Shleifer, 1995. "Economic Growth in a Cross-Section of Cities," NBER Working Papers 5013, National Bureau of Economic Research, Inc.
    15. repec:hoo:wpaper:e-95-4 is not listed on IDEAS
    16. Gabaix, Xavier & Ioannides, Yannis M., 2004. "The evolution of city size distributions," 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 53, pages 2341-2378 Elsevier.
    17. Wang, Ping, 1990. "Competitive equilibrium formation of marketplaces with heterogeneous consumers," Regional Science and Urban Economics, Elsevier, vol. 20(3), pages 295-304, November.
    18. Xavier Gabaix, 1999. "Zipf's Law and the Growth of Cities," American Economic Review, American Economic Association, vol. 89(2), pages 129-132, May.
    19. Tamura, Robert, 2002. "Human capital and the switch from agriculture to industry," Journal of Economic Dynamics and Control, Elsevier, vol. 27(2), pages 207-242, December.
    20. Gilles Duranton, 2002. "City size distributions as a consequence of the growth process," LSE Research Online Documents on Economics 20065, London School of Economics and Political Science, LSE Library.
    21. Y Ioannides & Henry Overman, 2000. "Zipfs Law for Cities: An Empirical Examination," CEP Discussion Papers dp0484, Centre for Economic Performance, LSE.
    22. J.V. Henderson, 1972. "The Sizes and Types of Cities," Working Papers 75, Queen's University, Department of Economics.
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