Spatial scale of agglomeration and dispersion: Number, spacing, and the spatial extent of cities

Cities have become fewer, bigger, and flatter in many countries. Better transport access has fostered the concentration of economic activities toward fewer, bigger cities, while each city has become more decentralized. We show that two types of dispersion forces against spatial agglomeration explain the dual evolution of cities. Dispersion forces within a city, such as those arising from the consumption of limited land, affect only the city's residents. A decrease in transport costs reduces the relative benefits of agglomeration in a congested central location, making the population distribution in each city flatter and more spread out to achieve a balance between the costs and benefits of agglomeration. Dispersion forces that spill over beyond a city, such as market crowding, make locations near the city unattractive. Lower transport costs promote competition for a wider area around each city, leaving fewer cities with larger distances between them. A model's comparative static results, and thus its policy implications, depend on the type of dispersion forces it incorporates.