Shrinking population and the urban hierarchy

Ho Yeon Kim

No 360, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This paper examines whether population shrinkage leads to changes in urban hierarchy in terms of their relative size and function from the standpoint of the new economic geography. We find some salient patterns in which small cities in the agglomeration shadow become relatively bigger as medium industries spill over on them. This appears to be quite robust against a variation in the rate of natural change among cities. Thus, rank-size relationship and the urban hierarchy are partly disrupted as population shrinks. Regarding the welfare of the residents, a lower demand for land initially causes rent to go down, which boosts the utility. However, the illusion is short-lived because markets soon begin to shrink and suppress wages. We also find that it is better to maintain a slow pace of overall population decline in the long-term perspective. More importantly, it is crucial to sustain the relative livability of smaller cities to minimize the overall loss of utility.

Keywords: South Korea; Economic geography; Population; Urban societies; Local economy; Industry; Population shrinkage; Rank-size rule; Central place theory (search for similar items in EconPapers)
JEL-codes: R12 R23 (search for similar items in EconPapers)
Date: 2012-08-01
New Economics Papers: this item is included in nep-geo and nep-ure
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 360. 2012-08-01

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