"A Simple Model of City Crowdedness"

FRB of Kansas City Working Paper No. RWP 04-12

37 Pages Posted: 14 Jan 2005

See all articles by Jordan Rappaport

Jordan Rappaport

Federal Reserve Bank of Kansas City

Date Written: December 2004

Abstract

Population density varies widely across U.S. cities. A calibrated general equilibrium model in which productivity and quality-of-life differ across locations can account for such variation. Individuals derive utility from consumption of a traded good, a nontraded good, leisure, and quality-of-life. The traded and nontraded goods are produced by combining mobile labor, mobile capital, and non-mobile land. An eight-fold increase in population density requires an approximate 50 percent productivity differential or an approximate 20 percent compensating differential. A thirty-two-fold increase in population density requires an approximate 95 percent productivity differential or a 33 percent compensating differential. Empirical evidence suggests productivity and quality-of-life differentials of this magnitude are plausible. The model implies that broad-based technological progress can induce substantial migration to localities with high quality-of-life.

Keywords: Population density, productivity, quality-of-life, compensating differentials, economic growth

JEL Classification: O400, O510, R110, R120

Suggested Citation

Rappaport, Jordan, "A Simple Model of City Crowdedness" (December 2004). FRB of Kansas City Working Paper No. RWP 04-12, Available at SSRN: https://ssrn.com/abstract=648643 or http://dx.doi.org/10.2139/ssrn.648643

Jordan Rappaport (Contact Author)

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States
816-881-2018 (Phone)
816-881-2199 (Fax)

HOME PAGE: http://www.kansascityfed.org/speechbio/rappaport.cfm

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