TAILIEUCHUNG - A Companion to Urban Economics - Arnott and McMillen - Part 1

P A R T I Urbanization The essays in part I deal with different facets of urbanization. The Concise Oxford Dictionary defines urbanization as “rendering urban” or “removing the rural character of a district. | A Companion to Urban Economics Edited by Richard J. Arnott Daniel P. McMillen Copyright 2006 by Blackwell Publishing Ltd PART I Urbanization A Companion to Urban Economics Edited by Richard J. Arnott Daniel P. McMillen Copyright 2006 by Blackwell Publishing Ltd Urbanization The essays in part I deal with different facets of urbanization. The Concise Oxford Dictionary defines urbanization as rendering urban or removing the rural character of a district. In everyday usage the term connotes the dynamic process whereby a district undergoes the transformation from being rural to being urban. The term is here used somewhat more broadly. Urban economists define a city as a spatial concentration of economic activity. Accordingly urbanization covers description of the spatial pattern of economic activity over space and explanation of that pattern as well as of the evolution of that pattern. Imagine an economy on a large homogeneous plain in which transportation is costly and in which all firms produce under constant or decreasing returns to scale. Such an economy exhibits a uniform distribution of economic activity over space. Since each household produces everything it consumes in its own backyard we may refer to such an economy as a backyard economy. There are no benefits from spatially concentrating economic activity but there are costs in particular transportation costs. While an uneven distribution of resources over space gives rise to a nonuniform distribution of economic activity over space this factor can explain only a fraction of the high degree of spatial concentration of economic activity observed in today s service- and knowledge-based economies. There is broad agreement among economists that at the present time the dominating trade-off determining the spatial structure of economic activity is between transport costs and increasing returns to scale in production. Consider an economy that produces a single good in factories that exhibit increasing returns to .

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