On microfoundations of the city

Picard, Pierre M.;Tabuchi, Takatoshi
(2013) Journal of Economic Theory — Vol. 148, n° 6, p. 2561-2582 (2013)

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Authors
  • Picard, Pierre M.University of Luxembourg
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  • Tabuchi, TakatoshiUniversity of Tokyo
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Abstract
This paper considers the spatial structure of a city subject to final demand and vertical linkages. Individuals consume differentiated goods (or services) and firms purchase differentiated inputs (or services) in product (or service) markets where firms compete under monopolistic competition. Workers rent their residential lots in an urban land market and contribute to the production of differentiated goods and inputs. We show that firms and workers co-agglomerate and endogenously form a city.We characterize and discuss the spatial distribution of firms and consumers in such cities on one- and two-dimensional spaces.We show that final demand and vertical linkages raise the urban density and reduce the city spread.
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Picard, P. M., & Tabuchi, T. (2013). On microfoundations of the city. Journal of Economic Theory, 148(6), 2561-2582. https://doi.org/10.1016/j.jet.2013.07.023 (Original work published 2013)