Urbanization Patterns: European Versus Less Developed Countries

This paper develops a model in which the interaction between transport costs, increasing returns to scale, and labor migration across sectors and regions creates a tendency for urban agglomeration. Demand from rural areas favors urban dispersion. European urbanization took place mainly in the 19th century, with higher costs of spatial interaction, weaker economies of scale, and a less-elastic supply of labor to the urban sector than in less developed countries (LDCs) today. These factors could help explain why primate cities dominate in LDCs, whereas a comparatively small share of urban population lives in Europe's largest cities.