Edward L. Glaeser
Is the city dying? Professional seers, such as Richard Naisbitt and Alvin Toffler, have argued that information technology is rapidly making the need for faceto- face contact juid cities obsolete. Experts on the inner city see inevitable urban decay when they note that 16.7 percent of families in cities with greater than one million inhabitants live below the poverty line (compsired to 10 percent of families across the entire United States) and that the probability of being victimized by crime within a six-month period is 21.7 percent in a city with more thjui one million inhabitants (compared to 9.4 percent among cities with less than 10,000 people).'
Are they right? Will the 21st century see a decline in urbanization as rapid as the rise in urbanization over the 19th and 20th centuries? Or will breakthroughs in information technology and law enforcement transform the blighted inner city of today into the gentrified polis of tomorrow?
Recent trends are not nearly as pessimistic as the prognosticators. Over the past century the rise in U.S. urbanization has been dramatic, from 39 percent in 1890 to 53 percent in 1940 to 73 percent in 1970 to 75 percent in 1990. The share of the population living in the ten largest metropolitan areas has indeed declined from 23 percent to 21 percent since 1970, but the share of the population living in ' The relative poverty figures are taken from the 1994 City and County Data Book; Glaeser and Sacerdote (1996) provide the victimization figures.
• Edward L. Glaeser is Paul Sack Associate Professor of Political Economy, Harvard University, and Faculty Research Fellow, National Bureau of Economic Research, both in Cambridge, Massachusetts.
140 Joumal of Economic Perspectives
metropolitan areas with a population of more than 1 million rose from 41 percent in 1970 to 48,1 percent in 1990. (In general, most of the facts in this paper will stop at 1990, primarily because reliable urbjm population numbers are only available during census years.) Moreover, there is little general correlation between city size and the expected growth of cities or metropolitan areas either in the United States or elsewhere (Glaeser et al., 1995; Eaton and Eckstein, 1995; Dobkins and Ioannides, 1996), which suggests that there is no inexorable trend towards the decline of bigger cities. Workers who live in metropolitan areas surrounding a city with more than 500,000 workers earn 10 percent more than workers in metropolitan areas without big cities, and 34 percent more than workers outside metropolitan areas altogether (Glaeser and Mare, 1994) .^ About 96 percent of new product innovations occur in metropolitan areas, and 45 percent of these new innovations occur in four metropolitan areas: New York, Los Angeles, Boston and San Francisco (Feldmann and Audretsch, 1996). Twenty-five percent of the winners of the national Kennedy Center lifetime achievement awards for contribution to American culture went to people bom in New York Gity.*
Actually predicting the future of the city requires a framework for understanding the costs and benefits of urban life. The end of the city is only likely if we believe that either the benefits of urbanization are disappearing (as the techno-prophets argue) or that the costs of city life are rising astronomically (as the analysts of the inner city sometimes suggest), This paper will summarize what we know about agglomeration economies and congesting forces in order to assess how changes in these forces will affect the demand for cities.
Conceptually, a city is just a dense agglomeration of people and firms. All of the benefits of cities come ultimately from reduced transport costs for goods, people and ideas. The positive impact of agglomeration that comes from reducing the costs of moving goods lost most of its import2ince over the 20th century as transportation...