When Veblen meets Krugman: social network and city dynamics

Christian Ghiglino and Antonella Nocco

Economic Theory, 2017, vol. 63, issue 2, No 4, 470 pages

Abstract: Abstract The present paper explores the role of the social structure of suburban areas on city dynamics. We focus on relative concerns in the form of conspicuous consumption and introduce them into a standard economic geography model a la Krugman. We show that the level of social integration within the suburban areas of cities and the level of economic integration across cities are crucial in determining the city sizes. An interesting case arises with moderate trade costs when relatively small shares of income are devoted to the consumption of the differentiated good: if classes of workers are segregated (as in homogenous suburban areas), relative concerns tend to generate dispersed, medium-size cities; when workers of different classes socially interact, relative concerns contribute to foster socially integrated megalopolises. This result shows that keeping-up-with-the-Joneses motives may generate counterintuitive results when agents are able to choose their location.

Keywords: Agglomeration; Conspicuous consumption; City dynamics; Migration; Network effects; Economic geography (search for similar items in EconPapers)
JEL-codes: F12 F15 F20 F22 R23 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (10)

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DOI: 10.1007/s00199-015-0940-5

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