An Equilibrium Model of Urban Population and the Distribution of Income

The relationship between the level of income and the population of an urban area is a familiar Concern in urban economics. Existing models of this relationship assume a homogeneous labour force and hence no inequality in the size distribution of income within an urban area. In this paper we determine what happens to the degree of inequality in money incomes as urban population increases if there are two Classes of workers and if each Class is Compensated for the higher Costs associated with larger urban size. We Conclude that the primary determinant of the relationship between Changes in inequality and Changes in urban size is the Change in the skill mix of the area.