Reports
Discussion Papers
No.360 Shrinking Population and the Urban Hierarchy
by Ho Yeon KIM
August 2012
ABSTRACT
This
paper
examines
whether
population
shrinkage
leads
to
changes
in
urban
hierarchy
in
terms
of
their
relative
size
and
function
from
the
standpoint
of
the
new
economic
geography.
We
find
some
salient
patterns
in
which
small
cities
in
the
agglomeration
shadow
become
relatively
bigger
as
medium
industries
spill
over
on
them.
This
appears
to
be
quite
robust
against
a
variation
in
the
rate
of
natural
change
among
cities.
Thus,
rank-size
relationship
and
the
urban
hierarchy
are
partly
disrupted
as
population
shrinks.
Regarding
the
welfare
of
the
residents,
a
lower
demand
for
land
initially
causes
rent
to
go
down,
which
boosts
the
utility.
However,
the
illusion
is
short-lived
because
markets
soon
begin
to
shrink
and
suppress
wages.
We
also
find
that
it
is
better
to
maintain
a
slow
pace
of
overall
population
decline
in
the
long-term
perspective.
More
importantly,
it
is
crucial
to
sustain
the
relative
livability
of
smaller
cities
to
minimize
the
overall
loss
of
utility.
Keywords:
Population
shrinkage,
Rank-size
rule,
Central
place
theory
JEL
classification:
R12,
R23
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