Working Paper: CEPR ID: DP4062
Authors: Gilles Duranton; Diego Puga
Abstract: This Paper studies the theoretical micro-foundations of urban agglomeration economies. We distinguish three types of micro-foundations, based on sharing, matching, and learning mechanisms. For each of these three categories, we develop one or more core models in detail and discuss the literature in relation to those models. This allows us to give a precise characterization of some of the main theoretical underpinnings of urban agglomeration economies, to discuss modeling issues that arise when working with these tools, and to compare different sources of agglomeration economies in terms of the aggregate urban outcomes they produce as well as in terms of their normative implications.
Keywords: agglomeration; cities; increasing returns; microfoundations
JEL Codes: R12; R13; R32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sharing indivisible facilities (R53) | increased urban density (R23) |
| sharing indivisible facilities (R53) | urban agglomeration (R11) |
| increased worker-firm matches (J68) | higher productivity levels (O49) |
| learning mechanisms (C45) | innovation and efficiency (O31) |
| learning mechanisms (C45) | economic growth (O49) |