Urbanisation and the Onset of Modern Economic Growth
New paper titled "Urbanisation and the Onset of Modern Economic Growth" by Liam Brunt and Cecilia García-Peñalosa has been published in The Economic Journal.
A large literature characterizes urbanisation as resulting from productivity growth attracting rural workers to cities. Incorporating economic geography elements into a growth model, we suggest that causation runs the other way: when rural workers move to cities, the resulting urbanisation produces technological change and productivity growth. Urban density leads to knowledge exchange and innovation, thus creating a positive feedback loop between city size and productivity that initiates sustained economic growth. This model is consistent with the fact that urbanisation rates in Western Europe, most notably England, reached unprecedented levels by the mid-18th century, the eve of the Industrial Revolution.