A Unified Urban Model With Non-Homothetic Housing Demand

Robert-Nicoud, Frédéric, Pierre-Philippe Combes, Gilles Duranton and Laurent Gobillon

No 21164, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Abstract Canonical urban models fail to jointly account for flexible housing demand, non-degenerate city sizes, and observed urban systems. We introduce a unifying urban framework based on price-independent generalized linear (PIGL) preferences in which housing is a necessity. Non-homothetic housing demand generates income effects that cause urban costs to scale more strongly with population than wages, restoring a unique interior efficient city size under standard assumptions. The framework nests existing canonical models, remains tractable, and is consistent with key empirical regularities, including Zipf’s law and observed housing price elasticities. We also encapsulate a monocentric city model into our framework.

Keywords: Non-homothetic preferences; City size; City size distributions; Urban land use equilibrium (search for similar items in EconPapers)
JEL-codes: R12 R13 R21 (search for similar items in EconPapers)
Date: 2026-02
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