Working Paper: CEPR ID: DP10816
Authors: Edward L. Glaeser; Giacomo AM Ponzetto; Yimei Zou
Abstract: Should China build mega-cities or a network of linked middle-sized metropolises? Can Europe?s mid-sized cities compete with global agglomeration by forging stronger inter-urban links? This paper examines these questions within a model of recombinant growth and endogenous local amenities. Three primary factors determine the trade-o¤ between networks and big cities: local returns to scale in innovation, the elasticity of housing supply, and the importance of local amenities. Even if there are global increasing returns, the returns to local scale in innovation may be decreasing, and that makes networks more appealing than mega-cities. Inelastic housing supply makes it harder to supply more space in dense confines, which perhaps explains why networks are more popular in regulated Europe than in the American Sunbelt. Larger cities can dominate networks because of amenities, as long as the benefits of scale overwhelm the downsides of density. In our framework, the skilled are more likely to prefer mega-cities than the less skilled, and the long-run benefits of either mega-cities or networks may be quite different from the short-run benefits.
Keywords: Cities; Growth; Migration; Networks
JEL Codes: F15; O18; R10; R58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local returns to scale in innovation (O39) | trade-off between networks and megacities (R12) |
| inelastic housing supply (R31) | preference for networks in regulated areas (D85) |
| presence of amenities (R53) | desirability of urban structures (R11) |
| skilled workforce (J24) | preference for megacities over networks (D85) |
| consolidation of urban networks into megacities (F60) | diminished entrepreneurship (L26) |
| local culture lost (Z10) | diminished entrepreneurship (L26) |
| long-run benefits of urban configurations (R11) | short-run benefits (J32) |