Economic theories of systems of cities explain why production and consumption activities are concentrated in a number of urban areas of different sizes and industrial composition rather than uniformly distributed in space. These theories have been successively influenced by four paradigms: i) conventional urban economics emphasizing the tension between economies due to the spatial concentration of activity and diseconomies arising from that concentration; ii) the theory of industrial organization as it relates to inter-industry linkages and to product differentiation; iii) the New Economic Geography which ignores land markets but emphasizes trade among cities, fixed agricultural hinterlands and the endogenous emergence of geography; iv) the theory of endogenous economic growth. Among the issues examined are specialization versus diversification of cities in systems of cities, how city systems contribute to increasing returns in national and the global economies, the factors that determine skill distribution and income disparity between cities, the impacts of income disparity on welfare, whether population growth should cause economic activity to become more or less concentrated in urban areas, and how resources should be allocated efficiently in a system of cities. Related to the last issue we consider models where cities are organized by local planners or developers as well as cities that self organize by atomistic actions. A conclusion of the theoretical study of city systems is that markets fail in efficiently allocating resources across cities when certain intercity interactions are present and that a role for central planning may be necessary.

de l'Université catholique de Louvain A simple model of economic geography à la Helpman-Tabushi

We consider an economic geography model of a new genre: all firms and workers are mobile and their agglomeration within a city generates rising urban costs through competition on a land market. When commuting costs are low (high), the industry tends to be ag-glomerated (dispersed). With two sectors, the same tendencies prevail for extreme commuting cost values, but richer patterns arise for inter-mediate values. When one good is perfectly mobile, the corresponding industry is partially dispersed and the other industry is agglomerated, thus showing regional specialization. When one sector supplies a non-tradeable consumption good, this sector is more agglomerated than the other. The corresponding equilibrium involves an urban hierar-chy: a larger array of varieties of each good is produced within the same city.

This paper investigates positive and normative aspects of population distri-bution among cities when aggregate population is growing. On the positive level, the paper investigates how different allocation regimes, on the one hand, and different elasticities of substitution between housing and differentiated products, on the other, affect the characteristics of city-size distribution. On the norma-tive level, the paper investigates the potential sources of market failures and their policy implications. It is shown that the sources of market failures are rent-sharing externality, price markup, and multiple equilibria. Because of the latter, a straightforward elimination of the rent-sharing externality and the price markup may reduce welfare even below its achievable level under laissez-faire al-location. It depends on the stage of the aggregate population growth at the time when the policy is introduced (i.e., history matters). When the social planner is fully informed, a transfer scheme which induces the economy to convergence to the global optima can be designed.

Abstract: The long-term trends of urbanization suggest: not only have more cities formed, but the leading metropolises have grown larger, with a number of peripheral subcenters developing over time. Conventional models of urban growth are limited, in that commuting cost and congestion eventually result in decreasing returns in a monocentric city as population becomes very large. We construct a general-equilibrium model with dynamic interactions between spatial agglomeration and urban development, driven by location-dependent knowledge spillovers. Our contribution allows endogenous development of subcenters to capture benefits from knowledge spillovers and offset diminishing returns from urban congestion, thus permitting more sustained city growth.

This paper investigates the impact of the shape of transport costs on the structure of spatial equilibria. We consider a racetrack economic model in which firms and workers freely locate on the continuous space of a circumference. We present ’reasonably ’ weak conditions on the shape of transport costs under which continuous distributions of firms and workers are never stable equilibria. We also characterize conditions on the shape of transport costs under which discrete distributions are stable equilibria. The results confirm the idea that agglomeration of firms and workers in few cities is a natural outcome of economic interactions.

Abstract not found

Canonical analysis of the classical general equilibrium model demonstrates the existence of an open and dense subset of standard economies that possess fully-revealing rational expectations equilibria. This paper shows that the analogous result is not true in urban economies under reasonable modifications for this field. An open subset of economies where none of the modified rational expectations equilibria fully reveals private information is found. There are two important pieces. First, there can be information about a location known by a consumer who does not live in that location in equilibrium, and thus the equilibrium rent does not reflect this information. Second, if a consumer’s utility depends only on information about their (endogenous) location of residence, perturbations of utility naturally do not incorporate information about other locations conditional on their location of residence. Existence of equilibrium is proved. Space can prevent housing prices from transmitting information from informed to uninformed households, resulting in an inefficient outcome.

Abstract: The long-term trends of urbanization suggest: not only have more cities formed, but the leading metropolises have grown larger, with a number of peripheral subcenters developing over time. Conventional models of urban growth are limited, in that commuting cost and congestion eventually result in decreasing returns in a monocentric city as population becomes very large. We construct a general-equilibrium model with dynamic interactions between spatial agglomeration and urban development, driven by location-dependent knowledge spillovers. Our contribution allows endogenous development of subcenters to capture benefits from knowledge spillovers and offset diminishing returns from urban congestion, thus permitting more sustained city growth.

The paper explores urban structure first in a static economy with two final goods that are produced using raw labor and a variety of intermediates. Intermediates are themselves produced using raw labor by means of increasing returns to scale technology ala Dixit–Stiglitz. All goods are produced in cities that have a simple circular spatial structure. Final goods and intermediates may be used where they are produced as well as be traded among cities. The paper explores a rich variety of intercity trade patterns which allows for diversified cities that are autarkic in terms of all goods and for specialized cities. Cities can specialize in producing only intermediates, or only one of the final goods. Cities that specialize in the same final good benefit by trading intermediates among themselves. At the general equilibrium with free mobility, specialization (which may be interpreted as symmetry-breaking) is efficient. Presence of shipping costs and particular patterns of geography may interact to make feasible a variety of patterns of specialization. A city that is specialized in either of the final goods could benefit from importing intermediates from “satellite ” cities in its immediate vicinity that produce only intermediates. Optimum city sizes differ by type of specialization, and the model yields specific predictions about the relative frequencies of different types at the