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Industrial Bases and City Sizes

American Economic Review 2016
away from heavy manufacturing and bluecollar occupations, and towards professional activities, communications, finance, insurance, real estate, and high-tech activities. Should we expect these gains and losses to be spread across cities, or are certain cities likely to be gainers and others losers, in terms of population? Are losers likely to experience permanent declines in population; or, for some, will their losses level off or will they rebound? If the growth industries of an economy operate best in larger cities while declining industries tend to reside in smaller cities, this implies national population will shift from smaller cities to locating in larger cities. This increase in urban concentration means there will be changes in other patterns of resource usage. Efficient levels of per capita resources devoted to urban infrastructure (roads, sewers, parks, etc.) tend to rise with city size, and it is a common perception that the magnitudes of certain consumer externalities (congestion, air and water pollution, crime, etc.) rise with city size. This has implications for public policies governing the allocation of public investment and governing the regulation of externalities. Moreover, the changes in population allocation between larger and smaller cities, itself, involves to some extend a painful process of population upheavals and there may be public policies which can alleviate the costs of the adjustment process. In this paper, I outline a conceptual framework and empirical methodologies from which some of these issues can be examined.