Trade Costs Versus Urban Costs: Do Jobs Move to the Suburbs or to the Sticks ?
CORE Discussion Paper No. 2004/21
32 Pages Posted: 31 Mar 2007
Date Written: April 2004
We analyze how the interplay between urban costs, wage wedges, and trade costs may affect the interregional location of firms as wel l as the intraurban location, within the central business district or in a secondary employment center (SEC) of the selected region. In this way, we investigate, on the one hand, how trade may affect the internal structure of cities and, on the other hand, how decentralizing the production and consumption of goods to subcenters changes the intensity of trade by allowing large metropolitan areas to maintain their predominance. We show that, despite low commuting costs, SECs may emerge when the urban population is large and communication technologies are efficient, two features that seem to characterize modern economies. Moreover, when trade costs fall from high levels, the economy moves gradually from dispersion to agglomeration, favoring the formation of SECs. However, in an integrating world, the center of a small monocentric city could be more attractive than subcenters of large polycentric cities. Nevertheless, the core retains its predominance through the relative growth of its main center, which occurs at the expense of its subcenters.
Keywords: city structure, polycentric city, commuting costs, trade costs, relocation
JEL Classification: F12 F22, R12, R14
Suggested Citation: Suggested Citation