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1、ReviewWhycitiesexist?Whydofirmscluster?LocalizationeconomicsSharingintermediateinputsSharingalaborpoolLabormatchingKnowledgespilloverUrbanizationeconomicsSharing,Pooling,Matching,LearningCHAPTER4CitySizehowdeterminedanddistributedI.UtilityandCitySizeHowdo
2、esanincreaseincitysizeaffecttheutilityofthetypicalworker?BenefitsandCostsofcityCentrifugalforce(agglomerationforce)AgglomerationeconomicsincreaselaborproductivityHigherwageCentripetalforce(congestionforce)PopulationgrowthincurslongercommutingtimeHighercom
3、mutingcostSofar,weignorethelocationdecisionsofworkerswithinaparticularcityLocationalequilibriumandlandrentPriceandjusttoachievethelocationalequilibriumDifferenceincommutinggeneratedifferentlandrentComparetwoworkers:OnelivesneartheproductioncenterAnotherli
4、ves5milesfromthecenterWhogetsrentfromland?Intheoreticalmodel,wealwaysassumeaun-observedlandownerHeresupposethatworkersownlandTokeepthingssimply,sharedequallyEachworkerearnsanaveragerentincome$15Utility=Laborincome–commutecost+rentincome-rentpaidLabormarke
5、tequilibriumLandmarketequilibriumII.ASystemofCitiesUtilitycurvetoexplorehowworkerforcesaredistributedConsideraregionwithatotalurbanworkerforceof6millionthreepossibleconfigurationsSixescities{A,B,C,D,E,F},eachwithaworkforceof1millionThreecities{D,E,F},each
6、withaworkforceof2millionTwocities{E,F},eachwithaworkforceof3millionUtilitycurvefordifferentcitysizeCitiesarenottoosmallAsshowninpointS,Isitastableequilibrium?Willworkershaveanincentivetomovefromonecitytoanother?SupposeagroupofworkersmovescityAtocityDWorkf
7、orceincityDwillincreaseCausingmoveupwardalongtheutilitycurve$60WorkforceincityAwillshrinkAlowerutilitylevelincityA$58Autilitygap$2unstableSelf-reinforcingeffectsgenerateextremeoutcomesMigrationisself-reinforcinginthepositivelyslopednearpointSThemoreworker
8、swhomigrateThelargertheutilitygapbetweentwocitiesThegreatertheincentivetorelocateExtremecase,everyonerelocatefromcityAtocityDThesamelogicappliestoothercitiesSupposecitiesA,B,CshrinkandeventuallydisappearWhileD,EandF
