One or infinite optimal city sizes? In search of an equilibrium size for cities

In this paper, the stylized assumption that one single “optimal” city size exists for all cities—achieved when marginal location costs equal marginal location benefits—is abandoned, as well as the opposite view that each city operates on its own cost and production curves, defining a specific optimal size. Instead, this work maintains the comparability among cities and demonstrates that urban specificities in functions performed, quality of life, industrial diversity and social conflicts shift up and down the benefits and costs linked to pure physical size, leading to different “equilibrium” sizes for cities. In order to achieve this result, a model of equilibrium urban size is set up, based on urban costs and urban benefits, merging elements suggested both by the traditional urban economics literature as well as by updated approaches considering also environmental quality, urban form and inter-urban cooperation networks. The model is then estimated on a sample of 59 European cities with data at FUA level. Empirical results allow the identification of city-specific “equilibrium” sizes. The error term, that is, the difference between actual urban population and the “equilibrium” one predicted by the model can be explained, beyond a measure of our ignorance, by good or bad governance, thereby suggesting future strategies for more efficient urban planning.