A Dynamic Spatial Model of Rural-Urban Transformation with Public Goods

This paper develops a dynamic model that explains the pattern of population and production allocation in an economy with an urban location and a rural one. Agglomeration economies make urban dwellers benefit from a larger population living in the city and urban firms become more productive when they operate in locations with a larger labor force. However, congestion costs associated with a too large population size limit the process of urban-rural transformation. Firms in the urban location also benefit from a public good that enhances their productivity. The model predicts that in the competitive equilibrium the urban location is inefficiently small because households fail to internalize the agglomeration economies and the positive effect of public goods in urban production.

Bibliographic Details

Main Authors:	Biller, Dan, Andres, Luis, Cuberes, David
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014-10
Subjects:	AGGLOMERATION ECONOMIES, BENCHMARK, CAPITAL INVESTMENT, CENTRALIZATION, CITIES, COMPETITIVE EQUILIBRIUM, CONSTANT RETURNS TO SCALE, CONSUMERS, CRISES, CULTURAL CHANGE, DECENTRALIZATION, DEVELOPING COUNTRIES, DEVELOPMENT POLICY, DIVISION OF LABOR, DYNAMIC ANALYSIS, ECONOMIC GEOGRAPHY, ECONOMIC GROWTH, ECONOMICS, EQUILIBRIUM, EXTERNALITIES, EXTERNALITY, FUNCTIONAL FORMS, GDP, GDP PER CAPITA, GROWTH RATE, HUMAN CAPITAL, INCOME, INCOME LEVELS, INCREASING RETURNS, INEFFICIENCY, INNOVATION, INTERNATIONAL TRADE, LABOR FORCE, LABOR MARKET, LABOR MIGRATION, LARGE POPULATION, LOCATION DECISIONS, MACROECONOMICS, MARGINAL PRODUCTIVITY, MARKET FAILURES, MIGRATION, MONOPOLISTIC COMPETITION, NATURAL RESOURCE, NUMBER OF WORKERS, OPPORTUNITY COST, OPTIMIZATION, PACE OF URBANIZATION, PERFECT COMPETITION, POLICY DISCUSSIONS, POLICY IMPLICATIONS, POLICY MAKERS, POLICY RESEARCH, POLICY RESEARCH WORKING PAPER, POLITICAL ECONOMY, POPULATION GROWTH, POPULATION SIZE, PRODUCT DIFFERENTIATION, PRODUCTION FUNCTION, PRODUCTIVITY INCREASES, PROGRESS, PUBLIC GOOD, RESIDENTIAL DEVELOPMENT, RESPECT, RURAL AREAS, RURAL POPULATION, SAFETY, SEARCH COSTS, STATIC THEORY, SUSTAINABLE DEVELOPMENT, TRANSPORT ECONOMICS, UNEMPLOYMENT, URBAN, URBAN AGGLOMERATIONS, URBAN AREA, URBAN AREAS, URBAN DEVELOPMENT, URBAN DWELLERS, URBAN ECONOMICS, URBAN ECONOMIES, URBAN ECONOMY, URBAN GROWTH, URBAN MIGRATION, URBAN POPULATION, URBANIZATION, URBANIZATION PROCESS, UTILITY FUNCTION, UTILITY FUNCTIONS, WAGES,
Online Access:	http://documents.worldbank.org/curated/en/2014/10/20257624/ https://hdl.handle.net/10986/20357
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