Urban Growth and Its Aggregate Implications

We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogeneous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains from agglomeration. The model bui...

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Bibliographic Details
Published in:Econometrica 2023-11, Vol.91 (6), p.2219-2259
Main Authors: Duranton, Gilles, Puga, Diego
Format: Article
Language:English
Subjects:
agglomeration economies
Cities
city‐size distributions
Commuting
Economic growth
Economic theory
Entrepreneurship
Housing costs
Human capital
planning regulations
Productivity
Regulation
Spillover effect
urban costs
Urban growth
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Summary:We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogeneous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains from agglomeration. The model builds on strong microfoundations, matches key regularities at the city and economy‐wide levels, and generates novel predictions for which we provide evidence. It can be quantified by relying on few parameters and gives us a basis to estimate them. We examine counterfactuals relaxing planning regulations or constraining city growth to assess the effect of cities on economic growth and aggregate output.
ISSN:0012-9682
1468-0262
DOI:10.3982/ECTA17936