Urban Growth and its Aggregate Implications

57 Pages Posted: 31 Dec 2019

See all articles by Gilles Duranton

Gilles Duranton

University of Pennsylvania - Real Estate Department

Diego Puga

Centre for Monetary and Financial Studies (CEMFI)

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Date Written: December 2019

Abstract

We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogenous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains. The model builds on strong microfoundations, matches key regularities at the city and economy-wide levels, and generates novel predictions for which we provide evidence. It can be quantified relying on few parameters, provides a basis to estimate the main ones, and remains transparent regarding its mechanisms. We examine various counterfactuals to assess quantitatively the effect of cities on economic growth and aggregate income.

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Suggested Citation

Duranton, Gilles and Puga, Diego, Urban Growth and its Aggregate Implications (December 2019). NBER Working Paper No. w26591, Available at SSRN: https://ssrn.com/abstract=3511301

Gilles Duranton (Contact Author)

University of Pennsylvania - Real Estate Department ( email )

Philadelphia, PA 19104-6330
United States

Diego Puga

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain

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