The Effects Of Improvements In Information Technology On Growth Of Cities: An Extension

Abstract

How will improvements in information technology affect growth of cities? Futurists have suggested that as telecommunications technology improves there will be no need for face-to-face contact and therefore cities, in which face-to-face interactions are facilitated, will become obsolete. This paper develops a general model where individuals involved in a relationship use two modes of interaction, face-to-face interactions and electronic communications. Comparative static analysis on the optimal solutions shows that improvements in telecommunications technology may increase or decrease the demand for face-to-face interactions, depending whether face-to-face interactions and telecommunications are substitutes or complements. The placement of the model within a spatial framework shows that city size increases with electronic communications if face-to-face interactions and electronic communications are complements.