Optimisation of city size.

Club theoretical analysis of migration between asymmetrical cities shows that centralised policy intervention is necessary to ensure the efficient allocation of people between cities. Administrative and economic measures are compared as policy instruments of central government. These instruments are found to differ in their effects on residential allocation and welfare. In particular, a lump-sum tax-transfer programme pools the welfare-creating potentials of cities, thus affecting the efficiency condition. Therefore, lump-sum tax-transfers are superior to both quantity rationing and Pigouvian taxes, and they also activate, rather than stabilise, migration.