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Optimization of City Size

Author

Listed:
  • Hannu Laurila

    (School of Management, University of Tampere)

Abstract

Club theoretic analysis of migration between asymmetric cities shows that centralized policy intervention is necessary to ensure the efficient allocation of people between cities. Quantity rationing and equalizing lump-sum tax-transfers are compared as policy instruments of central government. These instruments are found to differ in their effects on residential allocation and welfare. This is because lump- sum tax/transfers pool the welfare-creating potentials of cities thus affecting the efficiency condition. Therefore, lump-sum tax/transfers are superior to quantity rationing, and they also activate rather than stabilize migration.

Suggested Citation

  • Hannu Laurila, 2008. "Optimization of City Size," Working Papers 0866, Tampere University, Faculty of Management and Business, Economics.
    • Handle: RePEc:tam:wpaper:0866
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    File URL: http://urn.fi/urn:isbn:978-951-44-7427-9
    File Function: First version, 2008
    Download Restriction: no
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    More about this item

    Keywords

    agglomeration economies; club tehory; lump-sum taxes and transfers;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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