JOURNAL OF URBAN ECONOMICS 21,364-377 (1987) A Simultaneous-Equations Analysis of Urban Development: Migration and Industrial Growth in Israel’s New Towns* STUART A. GABRIEL?, MOSHE JUSTMAN, AND AMNON LEVY Department of Economics, Ben Gurion University of the Negev, Beer Sheva, Israel 84120 Received February 19,1985; revised July 31,1985 This study analyzes recent patterns of development of Israel’s new towns through application of a simultaneous-equations econometric model. This approach enables us to specify and test causal interactions among migration, industrial investment, employment, and other structural and policy variables affecting urban development. Our results affirm the importance of economic opportunity, agglomeration effects, population socioeconomic and ethnic composition, and accessin determining migra- tion flows. At the same time, unemployment and investment indices are affected by local labor-market conditions, government incentives, and regional development effects as well as by population composition and migration flows. Policy implica- tions of the analysis are considered. 0 1987 Academic press. IIIC. 1. INTRODUCTION Substantial academic research and policy debate has focused on the interactions between migration and urban development. These interactions form the basis of development planning and are fundamental to the growth of urban areas. Typically, econometric analysis describes these relations in a simultaneous structure where migration is depicted as both a causal agent and an outcome of economic development (see Okun [18], Muth [16,17], Olvey [19], Greenwood [9, lo], and Carlino and Mills [2]). The present study applies this approach to evaluate this nexus of interactions in the context of new town development in Israel. Israel’s program of new town development, dating from 1948, repre- sented a watershed in national settlement efforts, necessitated by the urgent needs and challenges faced by the new state. Early efforts at settling the hinterland took the form of communal and cooperative agricultural villages populated by motivated, organized, and trained pioneers. While the experi- *The authors are grateful to Iris Firstman, Orit Giladi, and Daniella Benisti for research and computing assistance. Financial support for this study was provided by grants from the University Research Fund, Faculty of Humanities and Social Sciences, and Monaster Center for Economic Research, Ben Gurion University of the Negev, and from the Jewish Agency of Israel. +Present address: Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington D.C. 20551. 364 00941190/87 $3.00 Copyright Q 1987 by Academic Press, Inc. All rights of reproduction in any form reserved.