IGC evidence paper - Cities

In this paper, we divide the field of urban development economics into three broad categories: agglomeration economies, density’s downsides, and spatial models of transportation and housing. The central question of agglomeration economics is if cities themselves actually increase productivity or if the observed relationship between density and earnings represents the selection of more skilled people into cities, or if there are some omitted variables that both attract people and make them wealthier.

The growing literature on urban development appears to confirm the positive effects of urbanisation on earnings that have been found in the wealthy world (Chauvin et al. 2017). Randomised control trials that induce migrants to come to cities have provided some of the most compelling evidence supporting the hypothesis that density increases earnings (Bryan, Chowdhury, and Mobarak 2014).