Authors: Stuart Donovan, Arthur Grimes, Dave Maré
Firms are attracted to locate in larger cities, consistent with ‘agglomeration economies’ that are found in many countries.
Residents, however, are attracted to smaller places; factors such as congestion in larger cities are a negative for residents.
The cost of building new housing rises as population increases in a city.
The supply of new housing adjusts only very gradually to a population influx so housing costs can rise sharply when more people wish to move to a city.
Donovan, S, A Grimes, D C Maré. 2020. “Modelling urban development in New Zealand” Motu Working Paper 20-07. Motu Economic and Public Policy Research. Wellington, New Zealand.
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