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Intercity Trade and Convergent versus Divergent Urban Growth

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  • Yannis M. Ioannides

Abstract

The paper studies intercity trade and growth in an overlapping-generations economy where tradeable goods are produced using a composite of capital, raw labor and intermediates, and are combined in each city to produce a composite. The composite is used for consumption and investment. Tax-financed investment that affects commuting costs endogenizes city size. A combination of weak (strong) diminishing returns and strong (weak) market size effects can lead to increasing (decreasing) returns to scale. Autarkic urban growth may be parallel or divergent. Capital growth in the integrated economy has the same dynamic properties as its counterpart for an economy with autarkic cities but leads to national constant returns to scale.

Suggested Citation

  • Yannis M. Ioannides, 2008. "Intercity Trade and Convergent versus Divergent Urban Growth," Discussion Papers Series, Department of Economics, Tufts University 0723, Department of Economics, Tufts University.
  • Handle: RePEc:tuf:tuftec:0723
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    File URL: http://ase.tufts.edu/econ/research/documents/2008/ioannidesTrade.pdf
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    References listed on IDEAS

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    1. 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.
    2. Yannis M. Ioannides & Henry G. Overman, 2004. "Spatial evolution of the US urban system," Journal of Economic Geography, Oxford University Press, vol. 4(2), pages 131-156, April.
    3. Esteban Rossi-Hansberg & Mark L. J. Wright, 2007. "Urban Structure and Growth," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 597-624.
    4. Ventura, Jaume, 2005. "A Global View of Economic Growth," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 22, pages 1419-1497 Elsevier.
    5. Anas, Alex & Xiong, Kai, 2003. "Intercity trade and the industrial diversification of cities," Journal of Urban Economics, Elsevier, vol. 54(2), pages 258-276, September.
    6. Berliant, Marcus & Wang, Ping, 2003. "Dynamic Urban Models: Agglomeration and Growth," Working Papers 1167, California Institute of Technology, Division of the Humanities and Social Sciences.
    7. Duncan Black & Vernon Henderson, 1997. "Urban Growth," NBER Working Papers 6008, National Bureau of Economic Research, Inc.
    8. Ioannides, Yannis M., 1994. "Product differentiation and economic growth in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 24(4), pages 461-484, August.
    9. Jaume Ventura, 2005. "A Global View of Economic Growth," Working Papers 203, Barcelona Graduate School of Economics.
    10. Henderson, J. Vernon & Ioannides, Yannis M., 1981. "Aspects of growth in a system of cities," Journal of Urban Economics, Elsevier, vol. 10(1), pages 117-139, July.
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    Cited by:

    1. Cuberes David, 2009. "A Model of Sequential City Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-41, May.

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