Urban Accounting and Welfare
American Economic Review
vol. 103,
no. 6, October 2013
(pp. 2296-2327)
Abstract
We use a simple theory of a system of cities to decompose the determinants of the city size distribution into three main components: efficiency, amenities, and frictions. Higher efficiency and better amenities lead to larger cities but also to greater frictions through congestion and other negative effects of agglomeration. Using data on MSAs in the United States, we estimate these city characteristics. Eliminating variation in any of them leads to large population reallocations, but modest welfare effects. We apply the same methodology to Chinese cities and find welfare effects that are many times larger than those in the US.Citation
Desmet, Klaus, and Esteban Rossi-Hansberg. 2013. "Urban Accounting and Welfare." American Economic Review, 103 (6): 2296-2327. DOI: 10.1257/aer.103.6.2296Additional Materials
JEL Classification
- H71 State and Local Taxation, Subsidies, and Revenue
- O18 Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- P25 Socialist Systems and Transitional Economies: Urban, Rural, and Regional Economics
- R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
- R41 Transportation: Demand, Supply, and Congestion; Safety and Accidents; Transportation Noise