City with forward and backward linkages

Pierre Picard and Takatoshi Tabuchi

No 2010/34, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: This paper considers the spatial structure of a city subject to final demand and vertical linkages. Individuals consume differentiated goods (or services) and firms purchase differentiated inputs (or services) in product (or service) markets where forms compete under monopolistic competition. Workers rent their residential lots in an urban land market and contribute to the production of differentiated goods and inputs. We show that firms and workers co-agglomerate and endogenously form a city. We characterize and discuss the spatial distribution of firms and consumers in such cities on one- and two-dimensional spaces (linear city and planar city). We show that final demand and vertical linkages raise the urban density and reduce the city spread. We finally show that a city is too much dispersed compared to the social optimum.

Keywords: Co-agglomeration; continuous distribution; new economic geography; forward and backward linkages; housing space (search for similar items in EconPapers)
JEL-codes: C62 F12 R12 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2010
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Citations: View citations in EconPapers (2)

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