The Equilibrium Distribution Of Population And Wages In A System Of Cities

James R. Khan and Haim Ofek
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James R. Khan: University of Tennessee

The Review of Regional Studies, 1992, vol. 22, issue 3, 201-216

Abstract: The positive relationship between wages and city size is shown to be consistent with equilibrium conditions predetermined by the dynamics of market forces. This means that wages are expected to rise with city size under diverse technological and institutional conditions, assuming mobility is unimpaired. A new interpretation for a widely observed statistical regularity is thus suggested. The new interpretation is consistent with conventional economic explanations (driven by the principle of compensating wage differentials in the presence of urban disamenities and rising costs of living). It is less restrictive, however. Sweeping assumptions about deteriorating amenities or rising cost of living throughout the entire range of city size are no longer required. These conditions need only hold in the immediate vicinity of equilibrium. In fact, their existence is shown to be a direct outcome of equilibrium, rather than an independent ex ante cause.

Date: 1992
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