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A Tractable Circular City Model with an Application to the Effects of Development Constraints on Land Rents

41 Pages Posted: 24 Oct 2012 Last revised: 25 Sep 2013

Satyajit Chatterjee

Federal Reserve Bank of Philadelphia

Burcu Eyigungor

Federal Reserve Bank of Philadelphia

Date Written: November 2, 2012

Abstract

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Superseded by Working Paper 13-37.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

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

Satyajit Chatterjee (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3861 (Phone)
215-574-4364 (Fax)

HOME PAGE: http://sites.google.com/site/chatterjeesatyajit/home

Burcu Eyigungor

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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