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Growth in a Cross-Section of Cities: Location, Increasing Returns or Random Growth?

  • Rafael González-Val


    (Barcelona Institute of Economics - University of Barcelona, Barcelona)

  • Jose Olmo

    (Jose Olmo, Centro Universitario de la Defensa & City University London)

This article analyzes empirically the main existing theories on income and population city growth: increasing returns to scale, locational fundamentals and random growth. To do this we implement a threshold nonlinearity test that extends standard linear growth regression models to a dataset on urban, climatological and macroeconomic variables on 1,175 U.S. cities. Our analysis reveals the existence of increasing returns when per-capita income levels are beyond $19; 264. Despite this, income growth is mostly explained by social and locational fundamentals. Population growth also exhibits two distinct equilibria determined by a threshold value of 116,300 inhabitants beyond which city population grows at a higher rate. Income and population growth do not go hand in hand, implying an optimal level of population beyond which income growth stagnates or deteriorates

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Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2011-21.

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Length: 47 pages
Date of creation: Dec 2011
Date of revision: Dec 2011
Handle: RePEc:xrp:wpaper:xreap2011-21
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