Externalities and CitiesReview of Economic Dynamics, 2001, vol. 4, issue 2, pages 245-274 Abstract: There is an elegant geometric theory of cities that describes the location of activities and the equilibrium pattern of land prices. In the simplest versions of the theory, production is centered at the city center, and people live at differing distances from their jobs. In choosing a residential location, households face a tradeoff between expensive land near the center with small travel times, and cheap land farther out with large travel costs. Everyone who has looked for housing in any city or suburb knows the reality of this tradeoff. The objective of this paper is to rework the model of a city with a spatial structure imposed on the production externality: The effect of one producer on the productivity of another is assumed to be a decreasing function of the distance between the two. By itself, this postulated force will pull producers together, or pull all of them toward a point I designate the center. The need for land as a factor of production will keep the city from collapsing on this point. The tension between these two factors will generate a land price gradient in equilibrium. (Copyright: Elsevier) Date: 2001 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:red:issued:v:4:y:2001:i:2:p:245-274 Ordering information: This journal article can be ordered from Access Statistics for this article Review of Economic Dynamics is edited by Gianluca Violante More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics |
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