Externalities, Indivisibility, Nonreplicability, and Agglomeration |
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Authors: | Yorgos Y Papageorgiou David Pines |
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Institution: | a School of Geography and Geology and Department of Economics, McMaster University, Hamilton, Ontario, Canada, L8S 4K1;b Eitan Berglas School of Economics, Tel-Aviv University, Ramat Aviv, Tel Aviv, Israel, 69978 |
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Abstract: | In this paper we argue that the impact of external scale economies and diseconomies on city size is not nearly as clear-cut as it is tacitly believed in urban economics. Similarly, city-size distortions are not caused by externalities alone. Indivisibility and nonreplicability, which prevent establishing the “right” number of cities, may represent a source for city-size distortions which can be stronger than the standard resource misallocation resulting from external scale economies and diseconomies. It follows that a direct population dispersion policy is not just an inferior substitute to Pigouvian taxes and subsidies but rather a useful complement. |
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