ABSTRACT
This chapter examines the role of cities in an economy. What do cities produce, when do they specialize in industrial production and when are they diversified? Why are cities of different sizes and what are the forces determining city sizes? How do cities interact with each other? What are the determinants of urban concentration, in terms of whether population is located in larger versus smaller types of cities? What are the impacts of government policies on urban concentration and urban development? What are the impacts of natural resources, economic growth, and international trade on a system of cities? What are the determinants of population composition of cities, in terms of high versus low skill workers? Are the patterns which evolve in a free market economy efficient ones, or are there externalities or incompleteness of markets which deter the realization of efficient outcomes?
