City Size Effects, Trends, and Policies

Abstract

As cities increase in size, so do wage rates for the same work. There is evidence that the wage differential is persistent and stable over time, which suggests that the differential does not arise from a lack of adjustment that is in process of correction. Indeed, there is an inverse relation between size and growth rate. Large metropolitan areas with high wage rates have been losing population in recent years, which is hardly a sign that their higher wage rates are temporary inducements to workers to move into those cities. It is much more plausible that the differential is a more-orless permanent money payment that compensates urban residents for costs they bear as population size increases. This argument does not deny that there are nonwage benefits as well as costs of city size, that city size effects may vary between individuals and groups, or that there may be scope for improved policy on population distribution. Nonetheless, the benefits of size seem to be outweighed by the costs; all types and groups of people generally can and do move about until alternative locations are less attractive than their current location; and solutions to population distribution problems will often emerge as byproducts to the solutions of more basic problems.

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