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CEP discussion paper

The economics of cities: from theory to data

Economic activity is highly unevenly distributed within cities, as reflected in the concentration of economic functions in specific locations, such as finance in the Square Mile in London. The extent to which this concentration reflects natural advantages versus agglomeration forces is central to a range of public policy issues, including the impact of local taxation and transport infrastructure improvements. This paper reviews recent quantitative urban models, which incorporate both differences in natural advantages and agglomeration forces and can be taken directly to observed data on cities. We show that these models can be used to estimate the strength of agglomeration forces and evaluate the impact of transportation infrastructure improvements on welfare and the spatial distribution of economic activity.

Stephen J. Redding

25 January 2023     Paper Number CEPDP1898

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This CEP discussion paper is published under the centre's Urban programme.

This publication comes under the following theme: What determines urban growth and urban decline and what should be the role of policy?