Economics%20116%20-%20Lecture%2017%20-%20Final

Economics%20116%20-%20Lecture%2017%20-%20Final - Economics...

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Economics 116: Economic Development UC San Diego, Spring 2009 Prof. Karthik Muralidharan Department of Economics Lecture 17
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Administrative Stuff Problem Set 3 Office Hours Tomorrow: 4-5pm Thursday: 3:45 – 4:45pm Lunch: 12:45 - 1:45pm tomorrow
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Lecture Outline (5/26/09) Economics of Cities Rural - Urban Migration Sources of wage rigidity Harris-Todaro Model Social Networks in Employment
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Urbanization We saw earlier that LFP in agriculture is higher in LDC’s and that decreasing LFP in agriculture and increasing it in manufacturing and services is an essential part of the development process Agriculture tends to be located in rural areas, while industry tends to be in more urban areas Thus, the process of development is typically accompanied by increased urbanization Definitions: Mostly based on population density High density = urban; low density = rural
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The Economics of Cities You can typically find much more economic activity in a city than in the country side Why are cities engines of economic activity? Economies of scale! Spatial coordination (transport costs) Matching of complementary factors of production Example of complex surgery Agglomeration externalities Then why are some cities not infinitely big? In other words, why do you have a range of
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Krugman (1991) Model of cities Partly won Nobel for work in “economic geography” Features: Economies of scale in production, Free migration of workers across cities (respond to both wages and costs of living) - key idea is “spatial arbitrage” Consumers value variety Variation across cities explained mostly by natural
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This note was uploaded on 05/06/2010 for the course ECON ECON 116 taught by Professor Muralidharan during the Spring '09 term at UCSD.

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Economics%20116%20-%20Lecture%2017%20-%20Final - Economics...

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