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American Economic Review: Vol. 94 No. 5 (December 2004)
AER Volume. 94, Issue 5 | 
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Gibrat's Law for (All) Cities
Article Citation
Eeckhout, Jan. 2004. "Gibrat's Law for (All) Cities."
The American Economic Review,
94(5): 1429-1451.
DOI: 10.1257/0002828043052303
DOI: 10.1257/0002828043052303
Abstract
Two empirical regularities concerning the size distribution of cities have repeatedly been established: Zipf's law holds (the upper tail is Pareto), and city growth is proportionate. Census 2000 data are used covering the entire size distribution, not just the upper tail. The nontruncated distribution is shown to be lognormal, rather than Pareto. This provides a simple justification for the coexistence of proportionate growth and the resulting lognormal distribution. An equilibrium theory of local externalities that can explain the empirical size distribution of cities is proposed. The driving force is a random productivity process of local economies and the perfect mobility of workers.
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Eeckhout, Jan
