A Threshold Model of Urban Development

30 Pages Posted: 21 Feb 2019

See all articles by Alberto Vesperoni

Alberto Vesperoni

King’s College London

Paul Schweinzer

University of Klagenfurt

Date Written: 2018

Abstract

We propose a simple model of distribution of economic activity across cities of endogenous size and number determined by individual incentives in the tradition of threshold models of social interaction. The individuals populating our model are endowed with idiosyncratic entrepreneurial creativity the realization of which requires urban agglomeration linked to a crowding cost. As the latter is higher in cities of larger size, this leads to a trade-off between productivity and congestion. While our focus on distributive aspects comes at the cost of highly stylized behavior, we aim to provide a tractable framework to think about the interlinkages between various measures of urban development which became increasingly available through accessible data sets. Our predictions include an U-shaped relationship between the well-known measures of urbanization and urban primacy, a hypothesis that we test empirically using World Bank data.

Keywords: agglomeration, urbanization, development

JEL Classification: C700, D710, O180, Q560

Suggested Citation

Vesperoni, Alberto and Schweinzer, Paul, A Threshold Model of Urban Development (2018). CESifo Working Paper No. 7326, Available at SSRN: https://ssrn.com/abstract=3338655 or http://dx.doi.org/10.2139/ssrn.3338655

Alberto Vesperoni (Contact Author)

King’s College London ( email )

Strand
London, England WC2R 2LS
United Kingdom

Paul Schweinzer

University of Klagenfurt ( email )

Universitätsstrasse 65-67
Klagenfurt, Carinthia A-9020
Austria

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