URBAN CONCENTRATION - THE ROLE OF INCREASING RETURNS AND TRANSPORT COSTS

Very large urban centers are a conspicuous feature of many developing economies, yet the subject of the size distribution of cities (as oppo sed to such issues as rural-urban migration) has been neglected by dev elopment economists. This article argues that some important insights into urban concentration, especially the tendency of some developing c ountries to have very large primate cities, can be derived from recent approaches to economic geography. Three approaches are compared: the well-established neoclassical urban systems theory, which emphasizes t he tradeoff between agglomeration economies and diseconomies of city s ize; the new economic geography, which attempts to derive agglomeratio n effects from the interactions among market size, transportation cost s, and increasing returns at the firm level; and a nihilistic view tha t cities emerge out of a random process in which there are roughly con stant returns to city size. The article suggests that Washington conse nsus policies of reduced government intervention and trade opening may tend to reduce the size of primate cities or at least slow their rela tive growth.