A Unified Theory of Cities

64 Pages Posted: 26 Jul 2021 Last revised: 18 Aug 2021

See all articles by Jacques-François Thisse

Jacques-François Thisse

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

Matthew Turner

Brown University - Department of Economics

Philip Ushchev

HSE University

Multiple version iconThere are 2 versions of this paper

Date Written: July 2021

Abstract

How do people arrange themselves when they are free to choose work and residence locations, when commuting is costly, and when increasing returns may affect production? We consider this problem when the location set is discrete and households have heterogenous preferences over workplace-residence pairs. We provide a general characterization of equilibrium throughout the parameter space. The introduction of preference heterogeneity into an otherwise conventional urban model fundamentally changes equilibrium behavior. Multiple equilibria are pervasive although stable equilibria need not exist. Stronger increasing returns to scale need not concentrate economic activity and lower commuting costs need not disperse it. The qualitative behavior of the model as returns to scale increase accords with changes in the patterns of urbanization observed in the Western world between the pre-industrial period and the present.

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Suggested Citation

Thisse, Jacques-François and Turner, Matthew and Ushchev, Philip, A Unified Theory of Cities (July 2021). NBER Working Paper No. w29078, Available at SSRN: https://ssrn.com/abstract=3893359

Jacques-François Thisse (Contact Author)

Catholic University of Louvain (UCL) ( email )

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Matthew Turner

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

Philip Ushchev

HSE University ( email )

3a Kantemirovskaya St, room 405
123 Griboedov Canal Embankment, room 123
Saint-Petersburg, Saint Petersburg 191119
Russia

HOME PAGE: http://https://sites.google.com/site/philipushchev/

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