Urban network externalities, agglomeration economies and urban economic growth

Abstract This study analyzes the effect of urban network externalities on urban growth and compares it with that of agglomeration economies from the perspective of the externality theory. Traditional regional and urban economic theories emphasize the role of agglomeration economies in promoting regional growth. However, urban networks have gradually become the main form of regional economic systems. Urban network externalities are also becoming increasingly critical with the dramatic development of infrastructure and information technology. This study identifies the national urban network and analyzes its structure and characteristics using complex network methods based on the data of train frequency among 273 municipal districts in China. Then, an urban growth model is constructed with Spatial Durbin Model specifications to examine the impact of urban network externalities on economic growth and compare it with that of agglomeration economies. The results show that the urban network externality has a significant effect on promoting urban economic development; cities with higher in-closeness centrality tend to enjoy higher economic growth due to their central position in the network. Moreover, compared with agglomeration economies, urban network externalities do not depend on the geographical proximity of cities but on the connections in the network, and can generate cross-spatial spillover effects.