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Environmental Policy and the Collapse of the Monocentric City

Efthymia Kyriakopoulou () and Anastasios Xepapadeas ()

No 1021, DEOS Working Papers from Athens University of Economics and Business

Abstract: We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of pollution - acts as a centrifugal force, while positive knowledge spillovers and a site with natural cost advantage act as centripetal forces. We study the agglomeration e ects caused by trade-o s between centripetal and centrifugal forces which eventually determine the distribution of economic activity across space. The rational expectations market equilibrium with spatially myopic environmental policy results either in a monocentric or in a polycentric city with the major cluster at the natural advantage site. The regulator�s optimum results in a bicentric city which suggests that when environmental policy is spatially optimal, the natural advantage sites do not act as attractors of economic activity.

Keywords: Agglomeration; Space; Environmental policy; Natural cost advantage; Knowledge spillovers; Monocentric-bicentric city (search for similar items in EconPapers)
JEL-codes: R38 Q58 (search for similar items in EconPapers)
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Working Paper: Environmental Policy and the Collapse of the Monocentric City
Working Paper: Environmental Policy and the Collapse of the Monocentric City
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