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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: http://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. 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.
    2. Soo, Kwok Tong, 2005. "Zipf's Law for cities: a cross-country investigation," Regional Science and Urban Economics, Elsevier, vol. 35(3), pages 239-263, May.
    3. Robert Tamura, 2002. "Human capital and economic development," Working Paper 2002-5, Federal Reserve Bank of Atlanta.
    4. Y Ioannides & Henry Overman, 2000. "Zipfs Law for Cities: An Empirical Examination," CEP Discussion Papers dp0484, Centre for Economic Performance, LSE.
    5. Esteban Rossi-Hansberg & Mark L. J. Wright, 2003. "Urban structure and growth," Discussion Paper / Institute for Empirical Macroeconomics 141, Federal Reserve Bank of Minneapolis.
    6. Jonathan Eaton & Zvi Eckstein, 1994. "Cities and Growth: Theory and Evidence from France and Japan," NBER Working Papers 4612, National Bureau of Economic Research, Inc.
    7. 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.
    8. Wang, Ping, 1993. "Agglomeration in a linear city with heterogeneous households," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 291-306, April.
    9. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
    10. 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.
    11. Gilles Duranton, 2002. "City Size Distributions As A Consequence of the Growth Process," CEP Discussion Papers dp0550, Centre for Economic Performance, LSE.
    12. Xavier Gabaix, 1999. "Zipf's Law and the Growth of Cities," American Economic Review, American Economic Association, vol. 89(2), pages 129-132, May.
    13. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-56, September.
    14. 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.
    15. Elise Brezis & Paul Krugman, 1993. "Technology and the Life Cycle of Cities," NBER Working Papers 4561, National Bureau of Economic Research, Inc.
    16. Glaeser, E.L. & Scheinkman, J.A., 1993. "Economic Growth in a Cross-Section of Cities," Harvard Institute of Economic Research Working Papers 1645, Harvard - Institute of Economic Research.
    17. 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.
    18. Jan Eeckhout, 2004. "Gibrat's Law for (All) Cities," American Economic Review, American Economic Association, vol. 94(5), pages 1429-1451, December.
    19. 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.
    20. Wang, Ping, 1990. "Competitive equilibrium formation of marketplaces with heterogeneous consumers," Regional Science and Urban Economics, Elsevier, vol. 20(3), pages 295-304, November.
    21. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
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