Urbanisation Patterns: European vs Less Developed Countries

We develop a model in which the interaction between transport costs, increasing returns, and labour migration across sectors and regions creates a tendency for urban agglomeration. Demand from rural areas favours urban dispersion. European urbanisation took place mainly in the XIX Century, with higher costs of spatial interaction, weaker economics of scale, and less elastic supply of labour to the urban sector than in LDCs today. These factors, together with a bias in the transport networks of LDCs towards serving larger cities, could help explain why European countries have developed balanced urban systems while primate cities dominate in LDCs.