A theory of heterogeneous city growth

• Author: Alain Venditti,Christian Ghiglino,Kazuo Nishimura
• DOI: http://doi.org/10.1111/ijet.12253
• Date: 01 March 2020
• Published date: 01 March 2020

Int J Econ Theory. 2020;16:27–37. wileyonlinelibrary.com/journal/ijet © 2020 IAET

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27

Received: 27 February 2019

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Accepted: 23 December 2019

DOI: 10.1111/ijet.12253

ORIGINAL ARTICLE

A theory of heterogeneous city growth

Christian Ghiglino

1

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Kazuo Nishimura

2

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Alain Venditti

3

1

Department of Economics, University of

Essex, Colchester, UK

2

RIEB, Kobe University, Kobe, Japan

3

Aix‐Marseille University, CNRS, EHESS,

Centrale Marseille, AMSE and EDHEC

Business School, Marseille, France

Correspondence

Alain Venditti, AMSE and EDHEC

Business School, Marseille, France.

Email: alain.venditti@univ-amu.fr

Funding information

French National Research Agency,

Grant/Award Numbers: ANR‐08‐BLAN‐

0245‐01, ANR‐17‐EURE‐0020; Japan

Society for Promotion of Science,

Grant/Award Numbers: #15H05729,

#16H0233598

Abstract

We consider an economy with three cities producing

different outputs. Two cities produce intermediate goods, a

type 1 city producing an intermediate “agricultural”good

with capital and labor only, and a type 2 city producing an

intermediate “industrial”good with capital, labor, and

human capital. A type 3 city produces the final good which

is obtained from the two intermediate goods and labor. The

asymmetric introduction of human capital allows us to

prove that the three cities experience, at equilibrium,

heterogeneous endogenous growth rates which are propor-

tional to the growth rate of human capital. We show

that the “industrial”type 2 city is characterized by the

larger growth rate while the “agricultural”type 1 city

experiences the lower growth rate, and thus the type 3 city

is characterized by a growth rate which is a convex

combination of the two former growth rates. This implies

that the relative size in terms of output of the “agricultural”

city decreases over time. This property allows us to recover

the empirical fact that most non‐agricultural production

occurs in growing metropolitan areas. But, simultaneously,

as we prove that total labor employed in each city is

proportional to the total population, the relative population

size distribution of cities is constant over time, as shown in

empirical studies.

KEYWORDS

city inequalities, endogenous growth, heterogeneous growth rates,

human capital, urban dynamics

JEL CLASSIFICATION

C61; C62; O41; R11; R12