Urban growth and its aggregate impl ications
Abstract:
We dev
elop an urban growth model where human capital promotes entrepreneurship an
d raises city productivity. Land-use regulation balances commuting and hous
ing costs against productivity gains to benefit local residents. Systematic
determinants and productivity shocks drive city growth, generating realist
ic city-size distributions. Cities experience parallel growth in expectatio
n, while subject to ups and downs around this common trend. Growth of exist
ing cities and net city entry accommodate aggregate population growth. Matc
hing key empirical moments at the city and economy-wide levels, we explore
the contribution of cities to aggregate growth and income levels and the ec
onomy-wide consequences of land use regulations.