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
Why aren’t all cities the same size ?
0 100 200 300
Rank of urbanized are
POPU
L
A
T
I
O
N
Size Distribution of …. Urbanized AreasThe Rank – Size Rule : bNitsche(2005) Rank = C / N29 studies C = constant; N = Population ; b = exponent b is to estimated from the data on rank & population.b = 0.80 – 1.20For the studies of the rank size rule that use economic cities rather than political cities ( b = 1.02 )
Size Distribution of Urban Areas,2000Popolation 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
Utility and City SizeWorkforce ( 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
MH
Localization Economies & Industry ClustersSharing Input SuppliersSharing a Labor Pool : Varying Demand for LaborBenefits and Cost of Labor PoolingSharing a Labor Poll : MatchingSharing Information : Knowledge Spillovers
Sharing Input SupplierThe 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.
Sharing a Labor Poll :Varying Demand for LaborHow 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)
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.
DIFFERENCE IN CITY SIZELocatization Economies : - Large city = 120 workers - Medium size cities = 60 - small cities = 30 Urbanization EconomiesThe Role of Consumer Goods
AGGLOMERATIVE ECONOMIES IN MARKETING : SHOPPING EXTERNALITIESImperfect SubstitutesComplementary GoodsRetail Clusters
50 100 110
number of cars per week
$
9
8
I.S S in Cl
D*
D1
INNOVATION IN TELECOMMUNICATIONS & THE FUTURE OF CITIESIn given relationshipEasier communication
TERIMAKASIH