The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States

77 Pages Posted: 24 Mar 2009 Last revised: 23 Sep 2010

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Joshua D. Gottlieb

University of Chicago; National Bureau of Economic Research (NBER)

Date Written: March 2009

Abstract

Empirical research on cities starts with a spatial equilibrium condition: workers and firms are assumed to be indifferent across space. This condition implies that research on cities is different from research on countries, and that work on places within countries needs to consider population, income and housing prices simultaneously. Housing supply elasticity will determine whether urban success shows up in more people or higher incomes. Urban economists generally accept the existence of agglomeration economies, which exist when productivity rises with density, but estimating the magnitude of those economies is difficult. Some manufacturing firms cluster to reduce the costs of moving goods, but this force no longer appears to be important in driving urban success. Instead, modern cities are far more dependent on the role that density can play in speeding the flow of ideas. Finally, urban economics has some insights to offer related topics such as growth theory, national income accounts, public economics and housing prices.

Suggested Citation

Glaeser, Edward L. and Gottlieb, Joshua D., The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States (March 2009). NBER Working Paper No. w14806. Available at SSRN: https://ssrn.com/abstract=1366206

Edward L. Glaeser (Contact Author)

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Joshua D. Gottlieb

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