Urban Accounting and Welfare / Klaus Desmet, Esteban Rossi-Hansberg.

Format:

Book

Author/Creator:

Desmet, Klaus.

Contributor:

National Bureau of Economic Research.

Rossi-Hansberg, Esteban.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16615.

NBER working paper series no. w16615

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

This paper proposes a simple theory of a system of cities that decomposes the determinants of the city size distribution into three main components: efficiency, amenities, and frictions. Higher efficiency and better amenities lead to larger cities, but also to greater frictions through congestion and other negative effects of agglomeration. Using data on MSAs in the United States, we parametrize the model and empirically estimate efficiency, amenities and frictions. Counterfactual exercises show that all three characteristics are important in that eliminating any of them leads to large population reallocations, though the welfare effects from these reallocations are small. Overall, we find that the gains from worker mobility across cities are modest. When allowing for externalities, we find an important city selection effect: eliminating differences in any of the city characteristics causes many cities to exit. We apply the same methodology to Chinese cities and find welfare effects that are many times larger than in the U.S.

Notes:

Print version record

December 2010.