Urban Agglomeration Economies in Consumption and Production
In this paper, we estimated the net agglomeration economies in the consumption side as well as the production side using Japanese city-based data of 1992, when interregional net migration nearly ceased. We showed that doubling city size increases the nominal wage by approximately 10% but decreases the real wage by approximately 5%-9%. A 10% increase of the nominal wage is attributed to the productivity increase in production activities while a 5%-9% decrease of the real wage is a compensation for the net agglomeration economies, which are the benefits from product variety minus the costs of congestion. In other words, city bigness not only enhances the productivity of firms but also brings net agglomeration economies to households. In this way, we separated the net agglomeration economies in the production side from those in the consumption side.
|Date of creation:||Feb 1999|
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