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City Growth in Europe

Nitsch, Volker

Volkswirtschaftliche Schriften, Vol. 518


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One of the most notable features of literature about "new economic geography" is a close association between theoretical and empirical work. In contrast to earlier research, theoretical studies are often much more strongly focused on real-world phenomena. At the same time, empirical work is often more closely tied to theoretical models. Instead of purely detecting possible stylized facts, considerable efforts have been made to test for the relevance of theoretical results.

A major shortcoming of recent empirical work in urban economics is, however, the startling concentration on basically only two estimation strategies. Probably driven by limited data availability, most analyses are either cross-country studies which usually seek to explore a data set as rich as possible, or the studies examine single country data and then often focus on U.S. experiences.

This book aims to provide a new - European - perspective. The basic idea is that a focus on European cities, apart from being interesting for itself, allows to combine both previous approaches. In particular, there is considerable cross-country variation while, in addition, also reliable historical data is available. Therefore, it is one of the contributions to compile a new data set of European cities which covers 13 countries and ranges from 1870 to 1990.

This set of data is then applied to explore several hypotheses which have been recently proposed in literature. In particular, three sets of issues are discussed: the growth pattern of cities and their implications for Zipf's law, the relationship between trade openness and urban concentration, and the role of history for city growth. The results are often striking. In contrast to some previous findings, for instance, there is only weak evidence for random growth across cities. Also, the empirical evidence for an association between external trade and internal geography turns out to be shaky. Finally, it is argued that the urban dominance of Vienna after the dissolution of the Austro-Hungarian Empire in 1918 is evidence in favor of path dependence in city growth.

Taken together, the book shows that the European experience provides a rich laboratory of real-world data which still waits to be explored.

Table of Contents

Section Title Page Action Price
Table of Contents 7
Chapter 1: Introduction 15
Chapter 2: Some Empirics on Zipf's Law for Cities 18
2.1 Introduction 18
2.2 Theoretical Explanations 20
2.3 Evidence on Zipf's Law in Europe 21
2.3.1 Data 22
2.3.2 Basic Results 25
2.3.3 Examining Explanations for Deviations from an Exponent of 1 35
2.4 Distribution Dynamics 37
2.4.1 Kernel Density 38
2.4.2 Transition Matrices 44
2.4.3 Which Cities Grow? 57
2.5 The Austrian Experience 61
2.6 Summary 68
Chapter 3: Krugman and Livas Elizondo Revisited: Is There a Link Between Trade Policy and Urban Concentration? 70
3.1 Introduction 70
3.2 The Model 71
3.2.1 Stylized World Geography 72
3.2.2 Wage Structure 73
3.2.3 Consumer's Problem 76
3.2.4 Producer's Problem 77
3.2.5 Government's Problem 79
3.2.6 Equilibrium 79
3.3 Simulation Results 81
3.3.1 Replicating Krugman and Livas Elizondo (1996) 82
3.3.2 Sensitivity Analysis 84
3.3.3 Allowing for Different Distances Between Domestic Locations and the ROW 89
3.3.4 Allowing for a Redistribution of Tariff Revenues 92
3.4 Conclusions 94
Chapter 4: Does Openness Reduce Urban Concentration? Evidence from 120 Years of European Data 96
4.1 Introduction 96
4.2 Potential Causes for Urban Concentration 98
4.2.1 Economic Development 98
4.2.2 Political Power 100
4.2.3 Transportation Infrastructure 100
4.3 Data 101
4.3.1 Data Sources 101
4.3.2 Alternative Measures of Urban Primacy 104
4.4 Results 109
4.4.1 Replicating Ades and Glaeser (1995) 109
4.4.2 More Years of Data 119
4.4.3 More Cities 122
4.4.4 Other Concentration Measures 125
4.4.5 Full Time Period, 1870-1990 126
4.4.6 Changes in Urban Concentration 130
4.5 Conclusion 133
Chapter 5: Does History Matter for City Growth? The Case of Vienna 136
5.1 Introduction 136
5.2 The Dissolution of the Austro-Hungarian Empire 137
5.3 First Evidence 143
5.4 Probing Deeper 145
5.4.1 Data and Methodology 145
5.4.2 Is Vienna Too Large? 149
5.4.3 Does Vienna's Primacy Fall Over Time? 153
5.5 Conclusion 158
Appendix A: Comparing Zipf Exponents for Different Sample Sizes 160
Appendix Β: Examining the Robustness of Eaton and Eckstein's (1997) Results 161
Appendix C: Replicating Krugman and Livas Elizondo (1996) 169
Appendix D: Description of the Data 171
Appendix E: Construction of Openness Measure 176
References 179
Data Sources 182
Subject Index 185