Working Paper: CEPR ID: DP7403
Authors: Carl Gaign; Jacques-François Thisse
Abstract: We investigate whether an aging population may challenge the supremacy of large working-cities. To this end, we develop an economic geography model with two types of individuals (workers and retirees) and two sectors (local services and manufacturing). Workers produce and consume; the elderly consume only. As a result, the mobility decision of workers is driven by both the wage gap and the cost-of-living gap, unlike the elderly who react to the differences in the cost of living only. We show that the return of pre-industrial urban system dominated by rentier cities does not seem to be on the agenda. Quite the opposite, the future of large working-cities is still bright, the reason being that today?s urban costs act as a strong force that prevents a large share of local services and manufacturing firms from following the rentiers in the elderly-cities, while the supply of differentiated b2c services prevent their complete separation.
Keywords: aging population; commuting costs; economic geography; sectoral mobility; spatial mobility
JEL Codes: F12; F16; J60; L13; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in the elderly population (J14) | decrease in the agglomeration of manufacturing firms (R32) |
| increase in the elderly population (J14) | increase in urban costs (R29) |
| increase in urban costs (R29) | decrease in the agglomeration of manufacturing firms (R32) |