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Urban Governance, Competition and Welfare

Author

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  • Hannu Laurila

    (Department of Economics, University of Tampere, 33014 Tampere, Finland, hannu.laurila@uta.fi)

Abstract

The market mechanism of spatial resource allocation is examined in a system of cities, where social welfare depends on city size. The competitive dynamics of the system is a product of the interplay between people's individual exit-type choices (migration) and their collective voice-type choices (urban governance). It is shown that the use of efficiency-enhancing measures of urban governance depends on the pressure of exit. A necessary condition for dynamic efficiency is that the market equilibrium of migration is non-stable, which sounds somewhat paradoxical. Dynamic efficiency is more likely to emerge between initially small cities, in which agglomeration economies dominate, than between initially large cities, in which agglomeration diseconomies dominate. The incentives for proper urban governance are somewhat ambiguous in the most relevant case, where cities are of asymmetrical size. It is therefore important to strengthen the incentives by means of national urban policy.

Suggested Citation

  • Hannu Laurila, 2004. "Urban Governance, Competition and Welfare," Urban Studies, Urban Studies Journal Limited, vol. 41(3), pages 683-696, March.
    • Handle: RePEc:sae:urbstu:v:41:y:2004:i:3:p:683-696
    DOI: 10.1080/0042098042000178744
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    References listed on IDEAS

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    1. McCann, Philip, 2001. "Urban and Regional Economics," OUP Catalogue, Oxford University Press, number 9780198776451.
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    3. Rubinfeld, Daniel L., 1987. "The economics of the local public sector," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 11, pages 571-645, Elsevier.
    4. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    5. A. J. Auerbach & M. Feldstein (ed.), 1987. "Handbook of Public Economics," Handbook of Public Economics, Elsevier, edition 1, volume 2, number 2.
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    Cited by:

    1. Geert Vissers & Ben Dankbaar, 2016. "Spatial Aspects of Interfirm Collaboration: An Exploration of Firm-Level Knowledge Dynamics," Regional Studies, Taylor & Francis Journals, vol. 50(2), pages 260-273, February.

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