Analyzing Urban Systems : Have Megacities Become Too Large?

The trend toward ever greater
urbanization continues unabated across the globe. According
to the United Nations, by 2025 closes to 5 billion people
will live in urban areas. Many cities, especially in the
developing world, are set to explode in size. Over the next
decade and a half, Lagos is expected to increase its
population 50 percent, to nearly 16 million. Naturally,
there is an active debate on whether restricting the growth
of megacities is desirable and whether doing so can make
residents of those cities and their countries better off.
When analyzing whether megacities have become too large,
policy makers often analyze a single city in depth. But no
city is an island: improving urban infrastructure in one
city might attract migrants, and a negative shock in one
location can be mitigated because people can move to
another. Considering the general equilibrium effects of any
such urban policy is thus key. That is, when deciding
whether to make medium-size cities more attractive, policy
makers need to understand how cities of all sizes will be
affected. The next section briefly summarizes the
theoretical framework and discusses which data are needed.
The third section implements the methodology for the
benchmark case of the United States. The fourth section does
the same for China and Mexico and compares the findings. And
the last section concludes. A technical online appendix
guides the reader through a practical, step-by-step,
discussion of how to do the analysis.