Alain Bertaud: Cities as Labor Markets

The welfare of cities is dependent on their labor markets. The larger the market, the more innovative and productive the city, as long as labor markets do not fragment into smaller adjacent markets as they grow. Maintaining mobility is therefore essential to the economic viability of cities.

Maintaining mobility has two implications: first, managing a transport system that allows an efficient movement of labor and goods across metropolitan areas, and second, insuring that regulations or inadequate land supply do not prevent firms and households from settling in the area that will maximize their welfare. This implies also that firms and households should be able to change location with low transaction costs when their circumstances are changing. Considering cities primarily as labor markets have important operational implications for the management of cities, in particular in the way transport systems are developed and the way land markets are allowed to operate. The next few decades offer a unique opportunity to speed up progress by following these examples.