The origins of urban agglomeration: social externalities and city leapfrogging in early Tel Aviv

Abstract We present a model of urban leapfrogging in which urban agglomeration may be induced by agglomeration in amenities as well as productivity. We distinguish between urban ‘overtaking’ where one city gradually moves ahead of another and urban ‘leapfrogging’, where a city leaps past the incumbents in terms of population and economic activity. We show that the former occurs when spatial general equilibrium is unique. The latter arises when there are multiple spatial equilibria. Multiple spatial equilibria are induced by the interplay between urban agglomeration in amenities as well as in productivity. The model is applied to a case study of the origins of agglomeration in pre-state Israel. Founded in 1909, by the 1930’s Tel Aviv had become the dominant city of Mandatory Palestine rapidly leapfrogging over other contenders such as Jaffa, Jerusalem and especially Haifa. Using limited data sources, we test for a social amenities wage premium in Tel Aviv, the determinants of residential choice for new arrivals, and the agglomerative point of no return. We suggest that the predominance of Tel Aviv was largely due to social agglomeration rather than to agglomeration in production. In addition, we suggest that the absence of an urban legacy can promote leapfrogging. We conclude with some observations on the relevance of our findings to contemporary agglomeration processes.