Big and small cities
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This document discusses factors that influence city size, including localization economies, urbanization economies, and agglomeration effects. It finds that while localization economies benefit from clustering of similar industries and sharing of suppliers and labor pools, urbanization economies provide benefits from large consumer markets. Additionally, imperfect substitutes and complementary goods can lead to retail clustering. Improved telecommunications may impact future city sizes by making communication and face-to-face interaction less important for industry clustering. In summary, city sizes are influenced by economies of scale from clustering industries and firms, access to large consumer markets, and the degree to which proximity and face-to-face interaction remain important.
Big and small cities
- 1. I will tell the story as I go along of small cities no less than of great. Most of those which were great once are small today; and those which in my own lifetime have grown to greatness, were small enough in the old days. HERODONTUS There is no need to worry about mere size. Sir Isaac Newton was very much smaller than a hippopotamus, but we do not on that account value him less. BERTRAND RUSSEL
- 2. Why aren’t all cities the same size ? 0 100 200 300 Rank of urbanized are P O P U L A T I O N Size Distribution of …. Urbanized Areas The Rank – Size Rule : b Nitsche(2005) Rank = C / N 29 studies C = constant; N = Population ; b = exponent b is to estimated from the data on rank & population. b = 0.80 – 1.20 For the studies of the rank size rule that use economic cities rather than political cities ( b = 1.02 )
- 3. Size Distribution of Urban Areas,2000 Popolation Range Number of Urban Areas Greater than 10 million 2 5 million to 10 million 4 1 million to 5 million 43 100,000 to 1 million 324 Less than 100,000 549 Popolation of Largest Cities as Share of National Population Metropolitan Area Population Share of National Population (%) Tokyo 19,037,361 15.76 Mexico City 16,465,487 20.97 So Paulo 15,538,682 11.46 Buenos Aires 10,759,291 35.47 Santiago, Chile 4,227,04 34.87 Montevideo, Uruguay 1,157,450 39.36
- 4. Utility and City Size Workforce ( million) Wage ( $ ) Labor Income ($) Commuting Cost ( $ ) Utility ( $ ) 1 8 64 5 59 2 10 80 10 70 4 11 88 22 66 70 66 59 U ($) 1 2 4 Worker/city (million) S M H
- 5. Localization Economies & Industry Clusters Sharing Input Suppliers Sharing a Labor Pool : Varying Demand for Labor Benefits and Cost of Labor Pooling Sharing a Labor Poll : Matching Sharing Information : Knowledge Spillovers
- 6. Sharing Input Supplier The input demand of an individual firm is not large enough to exploit the scale economies in the production of the intermediate input. Transportation cost are relatively high. If demanders and supplier interact in the design or fabrication of the intermediate input, face-to-face contact between buyer and seller is necessary, and proximity to the input supplier is important. Similarly, if the intermediate input is bulky, fragile, or must be delivered quickly, proximity is important.
- 7. Sharing a Labor Poll : Varying Demand for Labor How many workers will we hire ? What sort of labor skills will we need in our workers ? Expected Income in Cluster & at Isolated Site Wage Switch Cost Prob.of Switch Expc.Net Income Isolate size $20 8 ½ $16=(1/2.20)+1/2.(20-8) Industry cl 16 0 ½ $16=(1/2.16)+1/2.(16-0)
- 8. Benefits and Cost of Labor Pooling Isolated Firm Firm in Cluster Number of worker number of worker 120 80 120 160 $ 30 10 $ 30 20 10 D g D b Db Dg An isolated firm pays different wages in good times & bad times. A Firm in cluster pays the same wage in both cases, but hires more workers in goog time.
- 9. DIFFERENCE IN CITY SIZE Locatization Economies : - Large city = 120 workers - Medium size cities = 60 - small cities = 30 Urbanization Economies The Role of Consumer Goods
- 10. AGGLOMERATIVE ECONOMIES IN MARKETING : SHOPPING EXTERNALITIES Imperfect Substitutes Complementary Goods Retail Clusters 50 100 110 $ 9 8 I.S S in Cl D* D1
- 11. INNOVATION IN TELECOMMUNICATIONS & THE FUTURE OF CITIES In given relationship Easier communication
- 12. TERIMAKASIH