NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Nathan Seegert

University of Utah
Department of Finance
Spencer Fox Eccles Business Bldg. Room 1113
1655 East Campus Center Drive
Salt Lake City, Utah 84112

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NBER Working Papers and Publications

November 2016The Optimal Distribution of Population across Cities
with David Albouy, Kristian Behrens, Frédéric Robert-Nicoud: w22823
The received economic wisdom is that cities are too big and that public policy should limit their sizes. This wisdom assumes, unrealistically, that city sites are homogeneous, migration is unfettered, land is given freely to incoming migrants, and federal taxes are neutral. Should those assumptions not hold, large cities may be inefficiently small. We prove this claim in a system of cities with heterogeneous sites and either free mobility or local governments, where agglomeration economies, congestion, federal taxation, and land ownership create wedges. A quantitative version of our model suggests that cities may well be too numerous and underpopulated for a wide range of plausible parameter values. The welfare costs of free migration equilibria appear small, whereas they seem substantial...
 
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