Survival of the fittest in cities: agglomeration, selection, and polarisation

Kristian Behrens () and Frederic Robert-Nicoud

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Empirical studies consistently report that labour productivity and TFP rise with city size. The reason is that cities attract the most productive agents, select the best of them, and make the selected ones even more productive via various agglomeration economies. This paper provides a microeconomically founded model of vertical city differentiation in which the latter two mechanisms (`agglomeration' and `selection') operate simultaneously. Our model is both rich and tractable enough to allow for a detailed investigation of when cities emerge, what determines their size, and how they interact through the channels of trade. We then uncover stylised facts and suggestive econometric evidence that are consistent with the most distinctive equilibrium features of our model. We show, in particular, that larger cities are both more productive and more unequal (`polarised'), that inter-city trade is associated with higher income inequalities, and that the proximity of large urban centres inhibits the development of nearby cities.

Keywords: entrepreneur heterogeneity; firm selection; agglomeration; income inequalities; urbanization; urban systems (search for similar items in EconPapers)
JEL-codes: F12 R12 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2008-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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http://eprints.lse.ac.uk/28506/ Open access version. (application/pdf)

Related works:
Working Paper: Survival of the Fittest in Cities: Agglomeration, Selection, and Polarisation (2008)
Working Paper: Survival of the Fittest in Cities: Agglomeration, Selection and Polarisation (2008)
Working Paper: Survival of the Fittest in Cities: Agglomeration, Selection, and Polarisation (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:28506

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