Are Very Large Cities Successful? Searching for Dynamic Externalities Versus Evidence from Population Movements

Abstract

This article considers two ways of viewing the successfulness of large U.S. cities. The first, which has been very prominent in the past decade, emphasizes that large cities are successful because the advantages of proximity create dynamic knowledge externalities that, in turn, are a source of increasing returns and higher per capita incomes. It is argued here that empirical evidence concerning the nature and magnitude of the externalities is often conflicting, and in any case they have not been measured directly. An alternative approach is to consider international and domestic population movements, which suggest that large cities have not been successful in the view of many domestic residents. Domestic migration patterns favor intermediate-size cities. Some reasons are given for why domestic population deconcentration has taken place.