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Urban patterns, population density and optimal city dimension: The case of public infrastructure

Author

Listed:
  • Prieto, Ángel

    (Instituto de Recursos Naturales y Agrobiología, Salamanca, Spain)

  • Zofío, José Luis

    () (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

  • Álvarez, Inmaculada

    () (Departamento de Análisis Económico (Teoría e Historia Económica). UAM)

Abstract

Determination of the optimal city size underlies the economic rationality of infrastructure provision by local governments. We investigate the existence of decreasing average costs resulting from economies of scale, associated with larger urban dimensions in terms of population and housing, and economies of density, brought about by reductions in urban dispersion, and calculate optimal population densities when providing basic infrastructure. The methodology relies on novel definitions of scale and density economies and their estimation by way of flexible translog cost functions, extensively applied in the literature dealing with the provision of services—i.e., utilities, but extended here to their supporting infrastructure. Our results unveil the existence of latent economies of scale and density resulting in a cost excess in the provision of infrastructure due to the effect of urban sprawl that translates into suboptimal city sizes. Based on these findings several policy guidelines rationalizing urban development are suggested. The model is illustrated using Spanish statistical data collected from the nationwide local infrastructure and equipment survey, and prices from a new database that uses engineering cost benchmarks.

Suggested Citation

  • Prieto, Ángel & Zofío, José Luis & Álvarez, Inmaculada, 2010. "Urban patterns, population density and optimal city dimension: The case of public infrastructure," Working Papers in Economic Theory 2010/08, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  • Handle: RePEc:uam:wpaper:201008
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    Cited by:

    1. van den Berg, Caroline, 2015. "Drivers of non-revenue water: A cross-national analysis," Utilities Policy, Elsevier, vol. 36(C), pages 71-78.

    More about this item

    Keywords

    Urban patterns; Optimal urban density; Scale and density economies; Translog cost function.;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H1 - Public Economics - - Structure and Scope of Government
    • H4 - Public Economics - - Publicly Provided Goods
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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