Optimization of City Size

Hannu Laurila
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Hannu Laurila: School of Management, University of Tampere

No 866, Working Papers from Tampere University, Faculty of Management and Business, Economics

Abstract: Club theoretic analysis of migration between asymmetric cities shows that centralized policy intervention is necessary to ensure the efficient allocation of people between cities. Quantity rationing and equalizing lump-sum tax-transfers are compared as policy instruments of central government. These instruments are found to differ in their effects on residential allocation and welfare. This is because lump- sum tax/transfers pool the welfare-creating potentials of cities thus affecting the efficiency condition. Therefore, lump-sum tax/transfers are superior to quantity rationing, and they also activate rather than stabilize migration.

Keywords: agglomeration economies; club tehory; lump-sum taxes and transfers (search for similar items in EconPapers)
JEL-codes: H77 R51 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2008-08
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http://urn.fi/urn:isbn:978-951-44-7427-9 First version, 2008 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tam:wpaper:0866

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