Discussion Paper Details

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Title: Urban growth and its aggregate implications

Author(s): Gilles Duranton and Diego Puga

Publication Date: December 2019

Keyword(s): agglomeration economies, city size distributions, planning regulations, Urban costs and urban growth

Programme Area(s): International Trade and Regional Economics and Macroeconomics and Growth

Abstract: We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogenous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains. The model builds on strong microfoundations, matches key regularities at the city and economy-wide levels, and generates novel predictions for which we provide evidence. It can be quantified relying on few parameters, provides a basis to estimate the main ones, and remains transparent regarding its mechanisms. We examine various counterfactuals to assess quantitatively the effect of cities on economic growth and aggregate income.

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Bibliographic Reference

Duranton, G and Puga, D. 2019. 'Urban growth and its aggregate implications'. London, Centre for Economic Policy Research.