Optimal City Size and location theories

Question 1

The key forces pushing and pulling

Answer 1

productivity, wages, economic potential vs congestion, pollution, higher rents, green space (belt)

Question 2

Neoclassical idea

Answer 2

Agglomeration effects dominate diseconomies of scale.

Diagram of utility per worker and workers per city. upward slope to peak then downward slope

• cities not stable on positive
• stable on negative
• usually city is too big without intervention

Question 3

Cities are different from one another

Answer 3

Characterised by different functions and perform different specialisations (Henderson, 1985)

• no uniform optimal city size

Question 4

Different types of city

Answer 4

Specialised - one dominant industry
Diverse - A mix that encourage innovation

Question 4

Specialised vs Diverse cities (firm choice)

Answer 4

Theory. 1 = Duranton and Puga, 2001 - firm searching for appropriate production process for new product will experiment In diverse city and then move to specialised

Theory. 2 = firms move from one specialised to another - lower costs in specialised city but have to relocate as it changes

Question 5

Empirical evidence on firm location

Answer 5

Duranton and Puga, 2001
- French firms - 72% that change location move from a diverse to a specialised city

Question 6

Primate City

Answer 6

Jefferson, 1989
- LEDC the largest city weighs a much more prominent role relative to 2nd and third
- lack of medium city sizes and domination of one or two cities

BUT not limited to developing nations….
London = 13% of the UK population

Question 7

Controlling urban growth

Answer 7

UGB, green belt, restrict roads, water, sewers to certain areas

Question 8

Good and bad of UGB

Answer 8

Existing homeowners within the boundary benefit from the higher land prices.
Newcomers must pay higher rents, so they are harmed (e.g., young people, migrants).
A growth boundary provides public space at the expense of private space.
Tenants are harmed (but landlords benefit) from higher rents

Question 9

Urban hierarchy

Answer 9

ranking of places based on their size and functions they perform, as dictated by the central place theorem

Question 10

Central Place Theorem

Answer 10

Christaller, 1933 - explains why urban hierarchy exists
- producers cluster to supply largest market
- high order goods have larger range
- low order goods less specialised and purchased everywhere

assumptions: very restrictive - transport cost proportionate to distance and density is same everywhere

END up with a hierarchy (most central places provide all goods and services (mulligan et al., 2011)

high order goods only in CP

very simplistic and assumptions restrictive but does show some truth

Question 11

Built on CPT

Answer 11

Reilly 1931 and Huff 1966 - trade is attracted by the size of the town, deterred by distance to it

Larger the town, more likely people travel there

Market boundary A.B = Distance A,B / measure of population difference

larger city the further away the market boundary will be.

Question 12

different sectors - distance decay

Answer 12

Klaesson and Oner, 2014

• food highest distance decay
• Household good are larger
• Fits CPT theory HOG vs LOG

Question 13

CPT and Marshallian Ext. (1980)

Answer 13

firms cluster together in largest place. may outweigh concept of threshold and range by lowering costs from agglomeration/econs of scale

Question 14

Threshold and Range

Answer 14

Threshold - min demand for survival
Range - max distance that business can sell good

threshold in range for functional business

CPT assumptions

Question 15

key idea of largest encompassing all

Answer 15

Mulligan et al., 2011 - ‘Central place of given rank provides goods and services appropriate to its level and all below.

smallest villages - groceries
Towns - Schools, hospitals
Cities - legal services, airports
Largest cities - luxury goods