Cities, Institutions, and Growth: The Emergence of Zipf’s Law

Zipf’s Law characterizes city populations as obeying a distributional power law and is supposedly one of the most robust regularities in all of economics. This paper shows, to the contrary, that Zipf’s Law only emerged in Europe between 1500 and 1800. It documents how Zipf’s Law emerged with the development of markets in the centuries preceding the onset of modern economic growth. It shows that the longrun historical evidence is consistent with random growth theories of Zipfs Law. Because land and land-intensive intermediates entered city production as quasifixed factors, big cities grew relatively slowly and were “too small” before 1500. Then, as trade and rising agricultural productivity relaxed the land constraint, it became possible for growth to become random, for big cities to appear, and for Zipf’s Law to emerge. Random growth and Zipf’s Law emerged early to Western Europe. However, the institutions of the “second serfdom” in Eastern Europe were associated with delayed emergence. I find that laws limiting labor mobility and sectoral reallocation were associated with two factors that generate persistent deviations from Zipf’s Law: relatively low variation in growth rates and a negative association between city sizes and growth rates. These legal institutions were also associated with a 1/3 reduction in city growth in Eastern Europe 1500-1800. ∗Contact: Department of Economics, American University, 4400 Massachusetts Avenue NW, Washington, DC 20016. Email: [email protected]. I thank Barry Eichengreen, Chad Jones, Christina Romer, Brad DeLong, Xavier Gabaix, Suresh Naidu, and seminar participants at UC Berkeley, UC Davis, Dartmouth, UBC, and American for comments and suggestions. The errors are mine. 1