Urban Accounting and Welfare
Klaus Desmet, Esteban Rossi-Hansberg
American Economic Review · 2013 · Volume 103 · Issue 6
Abstract
We use a simple theory of a system of cities to decompose the determinants of the city size distribution into three main components: efficiency, amenities, and frictions. Higher efficiency and better amenities lead to larger cities but also to greater frictions through congestion and other negative effects of agglomeration. Using data on MSAs in the United States, we estimate these city characteristics. Eliminating variation in any of them leads to large population reallocations, but modest welfare effects. We apply the same methodology to Chinese cities and find welfare effects that are many times larger than those in the US.
Keywords
State and Local Taxation, Subsidies, and Revenue, Economic Development: Urban, Rural, Regional, and Transportation Analysis, Housing, Infrastructure, Socialist Systems and Transitional Economies: Urban, and Regional Economics, Regional Economic Activity: Growth, Development, Environmental Issues, and Changes, Urban, Real Estate, and Transportation Economics: Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics, Transportation: Demand, Supply, and Congestion, Safety and Accidents, Transportation Noise
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