41 Pages Posted: 24 Oct 2012 Last revised: 25 Sep 2013
Date Written: November 2, 2012
A tractable production-externality-based circular city model in which both firms and workers choose location as well as intensity of land use is presented. The equilibrium structure of the city has either (i) no commuting ("mixed-use" form) or (ii) a central business district (CBD) of positive radius and a surrounding residential ring. Regardless of which form prevails, the intra-city variation in all endogenous variables displays the negative exponential form: x(r) = x(0)e¯Øxr (where r is the distance from the city center and Øx depends only on preference and technology parameters). An application is presented wherein it is shown that population growth may lead to a smaller increase in land rents in cities that cannot expand physically because these cities are less able to exploit the external effect of greater employment density.
Superseded by Working Paper 13-37.
Keywords: Land use, density gradients, agglomeration economies, commuting costs
JEL Classification: E10
Suggested Citation: Suggested Citation
Chatterjee, Satyajit and Eyigungor, Burcu, A Tractable Circular City Model with an Application to the Effects of Development Constraints on Land Rents (November 2, 2012). FRB of Philadelphia Working Paper No. 12-25. Available at SSRN: https://ssrn.com/abstract=2166342 or http://dx.doi.org/10.2139/ssrn.2166342
By Mark Kagan
By Rebel Cole