RETAIL AMENITIES AND URBAN SPRAWL

This paper examines the interaction between local retail markets and population density in cities. We demonstrate that welfare costs of urban sprawl need not come only from road congestion or environmental externalities, as often suggested in the literature. A city also forgoes potential agglomeration economies in retail when it settles into a spatially sprawling equilibrium. Our theory predicts an additional spatial equilibrium where the city is inefficiently dense, characterized by strong retail agglomeration economies within the core.     

Locational Equilibria in Weberian Agglomeration

A simple Weberian agglomeration is developed and then extended as an innovative fixed‐charged, colocation model over a large set of locational possibilities. The model is applied to cases in which external economies (EE) arise due to colocation alone and also cases in which EE arise due to city size. Solutions to the model are interpreted in the context of contemporary equilibrium analysis, which allows Weberian agglomeration to be interpreted in a more general way than in previous analyses. Within that context, the Nash points and Pareto efficient points in the location patterns derived in the model are shown to rarely coincide. The applications consider agglomeration from two perspectives: one is the colocation behavior of producers as the agents of agglomeration and the other is the interaction between government and those agents in the interest of agglomeration policy. Extending the analysis to games, potential Pareto efficiency and Hicks optimality are considered with respect to side payments between producers and with respect to appropriate government incentives toward agglomeration.     

SPATIAL ASYMMETRIC DUOPOLY WITH AN APPLICATION TO BRUSSELS' AIRPORTS*

ABSTRACT In this paper, the problem of a city with access to two firms or facilities (shopping malls, airports, commercial districts) selling a differentiated product (shopping, flights) and/or offering a differentiated workplace is studied. Transport connections to one facility are congested. A model is presented for this asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. A comparative statics analysis is used to illustrate the properties of the equilibrium. A numerical model is then applied to the two Brussels airports. Three stylized policies are implemented to address the congestion problem: expansion of transport capacity, congestion pricing, and a direct subsidy to the uncongested facility. Our results indicate that the degree of intrinsic differentiation between the two firms is crucial in determining the difference in profit and market share. Price and wage differences also depend on trip frequency and consumer preferences for diversity. Congestion pricing is the most effective policy tool but all three options are shown to have attractive attributes.     

The general equilibrium effects of high-occupancy vehicle lanes on congestion,sprawl, energy use,and carbon emissions

High-occupancy vehicle (HOV) lanes have been promoted to encourage carpools, reduce traffic congestion, and improve air quality. At the partial equilibrium level, commuting with three workers per automobile clearly reduces highway congestion, lowers carbon emissions, and saves energy compared with three single drivers. This paper develops a numerical urban simulation model to generate the general equilibrium effects of HOV lanes on urban spatial structure, energy use, and greenhouse gas emissions. The major findings are that while HOV lanes reduce traffic congestion and improve welfare, the fall in transportation cost leads to urban sprawl, which results in higher dwelling energy use and a larger carbon footprint. Overall, the HOV lane policy has little effect on total energy consumption and carbon emissions. This is another classic case of general equilibrium effects reversing the partial equilibrium effects of an urban policy. In contrast, a gasoline tax policy leads to less urban sprawl but is less effective at lowering energy consumption and carbon emissions. Imposing congestion tolls is a more effective tool at reducing traffic congestion, saving energy, and lowering carbon emissions.     

Stability of Spatial Equilibrium*

Abstract. Asymptotic stability of equilibrium is often difficult to know when the number of variables exceeds four, since all eigenvalues of the Jacobian matrix are not analytically solvable. However, we obtain stability conditions for a general class of migration dynamics without computing eigenvalues. We show that a spatial equilibrium is stable in the presence of strong congestion diseconomies, but unstable in the presence of strong agglomeration economies. We also show existence of a stable equilibrium in the case of negligible interregional externalities, which is applicable to club goods, local public goods, and new economic geography.     

Probing A Traffic Congestion Controversy: Density and Flow Scrutinized

Probing a die-hard traffic congestion controversy, this paper scrutinizes two key variables, density and flow, under equilibrium versus optimal states. Optimization requires equilibrium flow to decrease under mild congestion, but increase under hyper-congestion. However, both increasing flow needed under hypercongestion and decreasing flow needed under mild congestion should be accompanied by decreasing density. Thus, inflow of vehicles should always be discouraged to either increase or decrease flow of vehicles for economic efficiency. Moreover, even when optimal policy requires equilibrium flow to increase, the optimal flow itself must decrease eventually as demand increases beyond a critical level.     

Congestion Tolling and Urban Spatial Structure

According to the standard model of urban traffic congestion and urbanspatial structure, congestion tolling results in a more concentrated city. In recent years, a new model of rush-hour urban auto congestion has been developed that incorporates trip-timing decisions—the bottleneck model. In the simplest bottleneck model optimal congestion tolling without toll-revenue redistribution has no effect on trip price because the efficiency gainsexactly equal the toll revenue collected. Optimal congestion tolling then has no effect on urban spatial structure. This paper formalizes and extends this result.     

The Return of Zipf: Towards a Further Understanding of the Rank-Size Distribution

We offer a general-equilibrium economic approach to Zipf's Law or, more generally, the rank-size distribution—the striking empirical regularity concerning the size distribution of cities. We provide some further understanding of Zipf's Law by incorporating negative feedbacks (congestion) in a popular model of economic geography and international trade. This model allows the powers of agglomeration and spreading to be in long-run equilibrium, which enhances our understanding of the existence of a rank-size distribution of cities.     

Duopoly prices under congested access*

Abstract. Consider two firms, at different locations, supplying a homogenous good at constant marginal production cost. Consumers incur travel costs to the firm for each unit purchased, and the travel costs increase with the amount of travel to each firm (congestion). When all traffic and all congestion are generated by travel to a duopolist, both the Nash–Bertrand equilibrium prices and the Nash–Cournot equilibrium prices exceed the sum of the marginal production cost and the marginal external travel cost. However, when the road is shared by travelers to the duopolists' facilities and travelers in competitive markets, the Nash–Bertrand duopoly price equals the competitive price and the Nash–Cournot price contains a markup.     

CULTURAL IDENTITY AND KNOWLEDGE CREATION IN COSMOPOLITAN CITIES*

ABSTRACT We study how the city system is affected by the possibility for the members of the same cultural diaspora to interact across different cities. In so doing, we propose a simple two‐city model with two mobile cultural groups. A localized externality fosters the productivity of individuals when groups interact in a city. At the same time, such interaction dilutes cultural identities and reduces the consumption of culture‐specific goods and services. We show that the two groups segregate in different cities when diaspora members find it hard to communicate at distance whereas they integrate in multicultural cities when communication is easy. The model generates situations in which segregation is an equilibrium but is Pareto dominated by integration.     

EMERGENCE OF LEAPFROGGING FROM RESIDENTIAL CHOICE WITH ENDOGENOUS GREEN SPACE: ANALYTICAL RESULTS

Leapfrog development is a typical form of sprawl. This paper aims at analyzing the existence, size, and persistence of leapfrogging in a dynamic urban economic model with endogenous green amenities. We analyze whether incoming households choose to settle at the fringe of the city or to jump further away depending on their preferences and the structure of the city. We first provide an analytical treatment of the conditions and characteristics under which a first leapfrog occurs and show how the optimal choice is affected by the size of the city, income, commuting costs, as well as the size of the area where green amenities are considered. We then study how further leapfrogging and multiple urban rings may appear and be maintained in the long‐run equilibrium, and how infill processes take place through time.     

Smart growth strategies,transportation and urban sprawl: simulated futures for Hamilton,Ontario

North American cities have undergone dramatic changes over the last century. Locations that were once inconvenient have become accessible through extensive road networks leading to population decentralization from the traditional urban centre to suburbia, creating polycentric sprawls from once monocentric communities. Hamilton, Ontario is one such city. The decentralization and urban decline of the city is widely attributed to sprawling development. This change in the sociospatial structure creates challenges for transportation planners as we see greater automobile dependency, greater commuting distances and increased congestion. Smart growth policies such as urban residential intensification (URI) aim to increase population densities in the urban core. This exploratory study estimates the benefits of such policies from a transportation aspect. It is predicted that the City of Hamilton will experience household growth of approximately 80,000 households over the period 2005–2031. Using IMULATE, an integrated urban transportation and land‐use model, a variety of development scenarios model this anticipated growth. Changes in vehicular emissions, traffic congestion and energy consumption as a result of URI are examined. Models of the land‐use/transportation relationship demonstrate how increasing population densities within a city's urban centre drastically reduce congestion, emissions and gasoline consumption.     

Illegal immigration,unemployment, and multiple destinations

We develop a multicountry model of illegal immigration with equilibrium unemployment. Two geographic cases are considered. One has two destinations adjacent to the source country while the other has just one destination country adjacent to it. In both cases, the equilibrium border control proves insufficient compared with the joint optimum, calling for enforcement by federal authorities. Absent such authorities, delegating border control to the country with a larger native labor force can improve each destination country’s welfare. In contrast, the equilibrium internal enforcement policy is efficient, obviating enforcement by supranational authorities.     

Employment Deconcentration: A New Perspective on America's Postwar Urban Evolution

In this study we show that during the postwar era the United States experienced a decline in the share of urban employment accounted for by the relatively dense metropolitan areas and a corresponding rise in the share of relatively less dense ones. This trend, which we call employment deconcentration , is distinct from the other well–known regional trend, namely, the postwar movement of jobs and people from the frostbelt to the sunbelt. We also show that deconcentration has been accompanied by a similar trend within metropolitan areas, wherein employment share of the more dense sections of MSAs has declined and that of the less dense sections risen. We provide a general equilibrium model with density–driven congestion costs to suggest an explanation for employment deconcentration.     

RURAL–URBAN MIGRATION AND UNEMPLOYMENT: THEORY AND POLICY IMPLICATIONS*

ABSTRACT We develop a regional model where, in the city, unemployment prevails because of too high (efficiency) wages, while, in the rural area, workers are paid at their marginal productivity. We characterize the steady‐state equilibrium and show that it is unique. We then consider two policies: decreasing urban unemployment benefits and subsidizing urban employment. We find that decreasing the unemployment benefit in the city creates urban jobs and reduces rural–urban migration since new migrants have to spend some time unemployed before they can find a job in the city. On the other hand, raising employment subsidies increases urban employment but may also increase urban unemployment because it triggers more rural–urban migration. In this respect, the employment subsidy policy can backfire by raising rather than reducing urban unemployment.     

POLLUTION MOBILITY,PRODUCTIVITY DISPARITY,AND THE SPATIAL DISTRIBUTION OF POLLUTING AND NONPOLLUTING FIRMS

This paper first develops a model to characterize the equilibrium distribution of polluting and nonpolluting firms and then turns to the larger question of whether the equilibrium distribution is socially optimal. We find that the equilibrium distribution of polluting firms differs from the social optimum when they generate a large amount of stationary pollution and have much higher or lower productivity than clean firms. In these cases, conventional pollution control approaches generally do not bring about an optimal distribution. Consideration of transport costs along with productivity and pollution changes some of the classic results of the new economic geography literature.     

Multi-Firm City Versus Company Town: A Micro Foundation Model of Localization Economies

When do we have a company town and when do we have a multi‐firm city? In this paper I analyze the impact of public infrastructure investment decisions on types of cities in a decentralized urban system. This is done in a one‐sector spatial general equilibrium model of a closed economy. Investment in public infrastructures reduces the fixed set up cost of all firms within the city resulting in multi‐firm cities. Thus, in this approach localization economies are modelled explicitly instead of assuming that larger industrial size within the city enhances productivity. On the other hand, when the infrastructure is not provided, a company town will be formed by a developer because of the fixed cost required by each firm. The decision of whether to invest in the provision of public infrastructures depends on the type of city that will provide households with the highest utility. This paper characterizes the conditions that lead to each of the two equilibrium configurations.     

LOCATION OF PUBLIC FACILITIES WITH SPILLOVER EFFECTS: VARIABLE LOCATION AND PARAMETRIC SCALE*

ABSTRACT This paper studies the location of public facilities of two neighboring local governments which consider not only the influence of the land market but also the spillover effects that each jurisdiction may have on the other. We obtain the following results: (1) in most cases, one of the cities behaves as an isolated city in choosing the facility location while the other enjoys the spillover effect as a free rider; (2) we also find that the equilibrium location in the two noncooperative city case is not socially optimal except for a special case.     

Central Cities as Engines of Metropolitan Area Growth*

The paper analyzes the role of central cities as engines of economic growth in their metropolitan area. We wonder if there are increasing returns to central city growth at the metropolitan level arising from the positive externalities associated with the unique features of central cities. To answer this question we analyze the causality between the economic growth of Spanish central cities and the growth of the other jurisdictions belonging to their metropolitan area (i.e., the suburbs). The analysis uses population and economic activity data for a sample of 28 Spanish metropolitan areas during 35 years. We use a Vector Error Correction Model (VECM) framework to estimate long‐run equilibrium relationships between the growth of central cities and their suburbs. The combination of panel data and a VECM is an innovative approach that is still being developed in econometrics. The results suggest that central city growth has a long‐run positive effect on the growth of the suburbs. We also inquire as to whether or not this positive effect depends on the size of the central city. The results suggest that the effect is much higher in the case of the largest cities, but that it is also important in the case of the smaller ones.     

Recent Theoretical Paradigms in Urban Growth

The aim of this article is to present a critical view of the theoretical toolboxes developed in urban economics to explain urban city size. The article starts with the consideration that, during the 1960s and 1970s, the question of optimal city-size tended to be expressed in a misleading way. The real issue is not an “optimal city size” but an “efficient size”, which depends on the functional characteristics of the city and on the spatial organization within the urban system. Economies of scale exist up to a certain city size. However, urban development generates conditions leading to structural readjustments which lead to new economic advantages. These structural adjustments may be either sectoral transformations towards higher-order functions, or the emergence of external linkages with other cities. The article provides recent empirical evidence of the role played by urban functions and city networking in explaining urban equilibrium size. The empirical analyses reported here witness the importance of the structural adjustment of cities needed to achieve a higher equilibrium size.