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.
Building Better Homes Towns and Cities National Science Challenge