A Theory of Urban Growth

TLDR

Localized information spillovers promote agglomeration, human capital accumulation, and endogenous growth. The study investigates how urbanization influences growth efficiency and how growth shapes urbanization patterns, whether local governments can internalize dynamic externalities, and how these processes affect income disparities across city types. The authors analyze whether local governments can internalize local dynamic externalities. City sizes grow with local human capital accumulation and knowledge spillovers, supported by empirical evidence.

Abstract

In an economy experiencing endogenous economic growth and exogenous population growth, we explore two main themes: how urbanization affects efficiency of the growth process and how growth affects patterns of urbanization. Localized information spillovers promote agglomeration and human capital accumulation and fosters endogenous growth. Individual city sizes grow with local human capital accumulation and knowledge spillovers; and city with empirical evidence. We analyze whether local governments can successfully internalize local dynamic externalities. In addition, we explore how growth involves real income differences across city types and how urbanization can foster income inequality.