Working Paper: NBER ID: w3607
Authors: Paul Krugman
Abstract: Urban agglomerations arise at least in part out of the interaction between economies of scale in production and market size effects. This paper develops a simple spatial framework to develop illustrative models of the determinants of urban location, of the number and size of cities, and of the degree of urbanization. A Central theme is the probable existence of multiple equilibria, and the dependence of the range of potential outcomes on a few key parameters.
Keywords: urban agglomeration; economies of scale; market size; urban location; multiple equilibria
JEL Codes: R12; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Transportation costs + Economies of scale (R41) | Urban agglomeration (R11) |
| Cost-minimizing decisions by firms (D21) | Urban concentrations (R23) |
| Transportation costs + Economies of scale (R41) | Circular relationship between production sites and market size (R32) |
| Circular relationship between production sites and market size (R32) | Larger urban agglomerations (R12) |
| Economies of scale + Transportation costs + Population density (R12) | Maximum size of cities (R12) |
| Economic factors (P42) | Degree of urbanization (R11) |
| Economic factors (P42) | Multiple equilibria in urbanization levels (D59) |