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 access in determining migration 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 implications of the analysis are considered.