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Urban interactions and spatial structure

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Author Info
Robert W. Helsley
William C. Strange

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Abstract

This article specifies and solves a model of endogenous spatial interactions where agents choose to visit a particular location to interact with others. Equilibrium fails to achieve first-best levels of visits and population density. A construction subsidy can restore second-best efficiency, but not first-best because it does not operate on the visit margin directly. A transportation subsidy can achieve first best. This result--which contrasts with earlier work--comes from treating interaction as a choice variable, rather than focusing on population density, a correlate. Developers are unable to implement even second-best efficiency because of their limited control over a city's land area. Copyright 2007, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/jeg/lbl027
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Publisher Info
Article provided by Oxford University Press in its journal Journal of Economic Geography.

Volume (Year): 7 (2007)
Issue (Month): 2 (March)
Pages: 119-138
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Handle: RePEc:oup:jecgeo:v:7:y:2007:i:2:p:119-138

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  1. Zenou, Yves, 2008. "Social Interactions and Labor Market Outcomes in Cities," IZA Discussion Papers 3283, Institute for the Study of Labor (IZA). [Downloadable!]
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This page was last updated on 2009-11-19.

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