Larger cities typically give rise to two opposite effects: tougher competition among firms and higher production costs. Using an urban model with substitutability of production factors and pro-competitive effects, I study product market responses to an increase in city population, land-use regulations and commuting costs. I show that those responses depend on the land intensity in production. If the input share of land is low, a larger city attracts more firms setting lower prices, whereas for an intermediate land share, city expansion increases both the mass of firms and product prices. For a high land share, the mass of firms decreases with city size while product price increases. Softer land-use regulations and/or lower commuting costs reinforce pro-competitive effects, making city residents better-off via lower product prices and broader diversity.

Competition, land prices and city size / Kichko, S.. - In: JOURNAL OF ECONOMIC GEOGRAPHY. - ISSN 1468-2702. - ELETTRONICO. - 20:(2020), pp. 1313-1329. [10.1093/jeg/lbz037]

Competition, land prices and city size

Kichko S.
2020-01-01

Abstract

Larger cities typically give rise to two opposite effects: tougher competition among firms and higher production costs. Using an urban model with substitutability of production factors and pro-competitive effects, I study product market responses to an increase in city population, land-use regulations and commuting costs. I show that those responses depend on the land intensity in production. If the input share of land is low, a larger city attracts more firms setting lower prices, whereas for an intermediate land share, city expansion increases both the mass of firms and product prices. For a high land share, the mass of firms decreases with city size while product price increases. Softer land-use regulations and/or lower commuting costs reinforce pro-competitive effects, making city residents better-off via lower product prices and broader diversity.
2020
Kichko, S.
Competition, land prices and city size / Kichko, S.. - In: JOURNAL OF ECONOMIC GEOGRAPHY. - ISSN 1468-2702. - ELETTRONICO. - 20:(2020), pp. 1313-1329. [10.1093/jeg/lbz037]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11572/344136
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