Other Topics Papers

I estimate an elasticity of wages with respect to city population of about 5 percent for Colombian cities. This finding is robust to a number of econometric concerns. The second main finding is a negative effect of market access on wages. Third main finding regards stronger agglomeration effects in the informal sector. In turn, this explains a range of other negative findings, including only weak evidence in favor of human capital externalities, no evidence of a complementarity between cities and skills, and an absence of learning effects. I do not find measurable effects of roads or amenities on wages either.

This chapter argues for more academic investments in understanding urbanization in developing countries. It advocates for micro-based research that neither falls into the trap of poorly identified macro studies nor gets too narrow and loses sight of the big picture.

This chapter discusses the literature on agglomeration economies from the perspective of jobs and job dynamics. It provides a partial review of the empirical evidence on agglomeration externalities; the functionality of cities; the dynamic relationship between cities, jobs, and firms; and the linkages between cities. We provide the following conclusions. First, agglomeration effects are quantitatively important and pervasive. Second, the productive advantage of large cities is constantly eroded and needs to be sustained by new job creations and innovations. Third, this process of creative destruction in cities, which is fundamental for aggregate growth, is determined by the characteristics of urban systems and broader institutional features. We highlight important differences between developing countries and more advanced economies. A major challenge for developing countries is the transformation of their urban systems into drivers of economic growth.

This article examines the association between one of the most basic institutional forms, the family, and a series of demographic, educational, social, and economic indicators across regions in Europe. Using Emmanuel Todd’s classification of medieval European family systems, we identify potential links between family types and regional disparities in household size, educational attainment, social capital, labor participation, sectoral structure, wealth, and inequality. The results indicate that medieval family structures seem to have influenced European regional disparities in virtually every indicator that we considered. That these links remain, despite the influence of the modern state and population migration, suggests that such structures are either extremely resilient or in the past were internalized within other social and economic institutions as they developed.

This article provides a general overview of spatial economics, which covers location theory, spatial competition, and regional and urban economics. After a brief review of the main theoretical traditions, the fundamental role of non-convexities and imperfect competition is highlighted. The main challenges faced by theoretical and empirical research are also discussed, followed by a broader discussion of the relationship between this field of research and other sub-fields of economics and other disciplines.

Containing sprawl is a major preoccupation of many urban planners, who view sprawl as responsible for driving up environmental costs and congestion. Nevertheless, many economists see benefits to sprawl, allowing households access to larger and cheaper properties. This Round Table examines the costs and benefits of sprawl, shedding light on the linkages between urban form and economic growth, and explored the tradeoffs involved in trying to contain sprawl. Discussions were based on papers prepared by Elizabeth Deakin (UC Berkeley), Matthew Kahn (Tufts University), Gilles Duranton (University of Toronto) and David Banister (University College London).

This chapter analyses a few key issues pertaining to human capital externalities in cities. It shows the difficulties of properly identifying such externalities and explores the implications of such externalities for policy prescriptions.

This special issue contains papers by both economists and geographers on agglomeration and growth. In this introduction, we first provide a brief sketch of recent developments in the interaction between economists and geographers. We then propose some contextual background to make it easier for geographers to approach the economics papers of this issue and conversely. Finally, specific areas of overlapping interests to the two disciplines are also highlighted.

In this collection, Paul Cheshire and Gilles Duranton have brought together the most significant contributions to regional and urban economics since 1990. The volume presents papers on theoretical and empirical analyses of city structure and systems of cities. It places particular emphasis on the empirics of agglomeration and regional growth with a special section on the new economic geography and includes key policy-oriented contributions. The editors have written an new introduction which offers a comprehensive overview of the subject.

This paper develops a general equilibrium theory of endogenous firm and class formation under non-contractibility with heterogeneous individuals. A collectivist economy, a private-ownership economy, and a mixed economy are compared on the basis of identical economic fundamentals (methodological symmetry). Each economic system generates specific inefficiencies so that none dominates the others in general. The main trade-off is between the welfare loss associated with risk-taking in the private-ownership economy and the informational problems in the collectivist economy. We then use this framework to study the political economy of transition between economic systems and provide detailed welfare results.

In this paper, the concept of production systems is introduced. I assume a standard thick-market externality together with the idea that higher quality goods also require higher skills from workers. Firms face a trade-off between low-quality goods with low skill-requirements for which the potentially abundant labour force generates strong thick-market externalities and higher quality goods with higher skill-requirements. In equilibrium, the economy is partitioned into production systems, i.e., clusters of firms producing the same quality. The distribution of skills determines the boundaries of the production systems, which in turn determine the wages. In this framework an increase in the supply of skilled workers can induce first higher wages for all workers and then higher wages for the skilled but lower wages for the unskilled. This is consistent with the late 20th century evolution of the US labour market.

This paper explores a simple model of endogenous growth in an overlapping generations framework when labor supply is made endogenous. The following results are obtained: If leisure and consumption are substitutes, the economy can experience multiple equilibrium paths (including high growth and high labor supply or no growth and low labor supply). If the demand for leisure is inelastic, then the economy enjoys steady growth as in standard models. If leisure and consumption are complements, then production remains bounded, although endogenous growth is possible and socially desirable.

In this paper, the evolution of product differentiation in industries is modeled as the result of a cumulative cost-reduction process subject to spillovers in a differentiated oligopoly. Our results suggest that the long-run outcome is dependent on the intensity of spillovers and the shape of their diffusion function. With weak spillovers, firms dig their niche over time, differentiation remains important and cost-reduction keeps going. By contrast, if spillovers are strong and have a concave diffusion function, firms gradually use more similar technologies. This standardization process involves less and less investment. For spillovers of intermediate strength, complex technological landscapes may arise.

Although seldom modeled outside the monopolistic competition framework, market incompleteness and imperfect competition are central to the new growth theories. We propose here a strategic model of imperfect competition with endogenous growth and endogenous market structure where we focus on labor market issues. For growth to be possible, we assume increasing returns at the firm level. Due to heterogeneity on the labor market, the market structure is not degenerate. Then, because of increasing returns, short-run efficiency is maximized under monopoly and free entry implies too many firms in the market. However, in the long run competition can generate growth through a distribution effect, whereas a monopoly leads to a zero-growth steady state. Thus, there is a trade-off between static and dynamic efficiency. This trade-off implies the existence of a growth-maximizing degree of competition in our economy.

This paper takes seriously the idea that international trade has played an important role in explaining both some convergence between developed economies as well as rising inequalities at the personal level. Previous studies used traditional trade theory as a reference framework. The empirical consensus is now that differences in factor endowment explain at best a small fraction of rising wage inequalities. This argument, by contrast, builds on labor specialization and increasing returns. Deeper economic integration allows trade in differentiated intermediate goods and primary tasks, thus transforming local increasing returns into global increasing returns. This pushes towards geographical equalization. At the same time, deeper integration also increases the size of the pool of available skilled workers. This may lead them to a‘technological secession’as it makes more skill-demanding technologies more profitable. Technological secession in turn fosters wage inequalities at the personal level.

Traditional development economics states that industrialisation must be positively correlated with agricultural development as in the American and many European cases. However, some recent industrialisation experiences suggests a negative link which can be supported by a simple Ricardian argument Yet this argument is not consistent with the agricultural ‘leap forward’ that often occurred before industrialisation took place. Here, we develop a model in which, for a closed economy, industrialisation follows rising agricultural productivity. For a small open economy, multiple equilibria are possible and industrialisation tends to be associated with low agricultural productivity, but is triggered by sudden changes in it.

In a recent and interesting paper published in this journal (Vol. 21, 1991, pp. 491–509), Henderson and Abdel-Rahman (HAR in what follows) study the consequences of a taste for diversity in a system of specialized cities. They show that the equilibrium city size is too big at the unregulated market equilibrium. Moreover, the decentralization of the first-best according to HAR is more demanding than in standard Tiebout models (they argue that autonomous local governments able to levy lump-sum taxes are needed). I argue on the contrary that under local public ownership of the land, the first-best is reached when the firms are able to control their wages. With absentee landowners, equilibrium city size is too small at the unregulated market equilibrium.