Analyzing Urban Systems: Have Mega-Cities Become Too Large?∗

With the trend toward greater urbanization and the rapid emergence of mega-cities continuing unabated, many policy makers ask themselves whether some cities are becoming too large, and whether policies should be aimed at stimulating the growth of intermediate-sized cities. In this chapter we use a simple model of a system of cities, together with some basic urban and aggregate data, to answer some of the following questions. Would there be any welfare gains from reducing the size of mega-cities and increasing that of intermediate-sized cities? Is there any sense in implementing policies that make cities more equal in terms of efficiency and amenities? Should infrastructure investments be focused on improving life in the most lagging cities? Is it advisable for policy to have a small city bias? As developing countries continue to grow, will their largest cities tend to become even larger or are we likely to see a more equal spatial distribution of people? We provide quantitative answers to these questions by using data from the U.S., as well as from two large developing countries, China and Mexico.