URSP 2200_Lec 4.pdf - URSP 2200 Urban Economic Studies Lecture 4 Sept 25th 2019 Chapter 4 City Size Big or small Pros and cons Hong Kong vs City S 2 Why

URSP 2200_Lec 4.pdf - URSP 2200 Urban Economic Studies...

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Sept 25 th , 2019 URSP 2200 Urban Economic Studies Lecture 4
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Chapter 4: City Size 2 Big or small? Pros and cons Hong Kong vs. City S
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Why Do Cities Vary in Size and Scope? 3
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Utility and City Size 4 Localization and urbanization economies increase productivity & wage Commute time increases with city size, decreasing leisure time
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5
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Locational Equilibrium Within a City 6 C: Differences in commute cost offset by differences in land rent E: Equal shares of land rent, averaging $15 Utility = Labor income + rental income - commute cost - rent paid
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System of Cities in a Region 7 Divide fixed number of workers among cities in region Six cities, each with 1 million workers Three cities, each with 2 million workers Two cities, each with 3 million workers
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Figure 4-2 Cities Are Not Too Small 8
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Figure 4-2 Cities May Be Too Large 9
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10
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Specialized and Diverse Cities 11 Two types of cities are complementary Many firms start in diverse city, which foster new ideas Maturing firms relocate to specialized cities to exploit localization economies
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A Model of Laboratory Cities 12 Firm gropes for ideal production process for new product by building prototypes, imitating other firms in the process Once ideal process found, firm produces large quantity in a specialized city Location for experimentation: Diverse city or series of specialized cities? Diverse city: Relatively high prototype cost, given lack of localization economies Specialized cities: Move from one city to another until ideal process found Diverse city is more profitable if moving costs are relatively large
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