Are Compact Cities Environmentally (and Socially) Desirable?

CREATE working paper serie 2012-4

36 Pages Posted: 1 Dec 2018

See all articles by Carl Gaigne

Carl Gaigne

French National Institute for Agricultural Research (INRA) - UMR 1302 SMART

Stephane Riou

GATE Lyon-Saint-Etienne

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Date Written: March 1, 2012

Abstract

There is a wide consensus among international institutions and national governments in favor of compact (i.e. densely populated) cities as a way to improve the ecological performance of the transport system. Indeed, when both the intercity and intra-urban distributions of activities are given, a higher population density makes cities more environmentally friendly as the average commuting length is reduced. However, when we account for the possible relocation of activities within and between cities in response to a higher population density, the latter may cease to hold. Because changes in population density affect land rents and wages, firms and workers re-optimize and choose new locations. We show that this may reshape the urban system in a way that generates both a higher level of pollution and welfare losses. As cities become more compact, agglomeration occurs and, eventually, the secondary business centers vanish. By increasing the average commuting length, these changes in the size and structure of cities may be detrimental to both the ecological and welfare objectives even if intercity trade flows decrease. This means that compact is not always desirable, and thus an increasing-density policy should be supplemented with instruments that impact the intra-and inter-urban distributions of activities. We argue that a policy promoting the creation of secondary business centers can raise welfare and decrease emissions.

Keywords: Greenhouse gas, commuting costs, transport costs, cities

JEL Classification: D61, F12, Q54, Q58, R12

Suggested Citation

Gaigne, Carl and Riou, Stephane and Thisse, Jacques-François, Are Compact Cities Environmentally (and Socially) Desirable? (March 1, 2012). CREATE working paper serie 2012-4. Available at SSRN: https://ssrn.com/abstract=3262031 or http://dx.doi.org/10.2139/ssrn.3262031

Carl Gaigne (Contact Author)

French National Institute for Agricultural Research (INRA) - UMR 1302 SMART ( email )

4 allée Adolphe Bobierre
CS 61103
Rennes Cedex, 35011
France

Stephane Riou

GATE Lyon-Saint-Etienne ( email )

34, rue Francis Baulier
Saint-Etienne, 42023
France

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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