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A Unified Theory of Cities

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  • Thisse, Jacques-François
  • Turner, Matthew
  • Ushchev, Philip

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.

Suggested Citation

  • Thisse, Jacques-François & Turner, Matthew & Ushchev, Philip, 2021. "A Unified Theory of Cities," CEPR Discussion Papers 16461, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16461
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    Cited by:

    1. Gaigné, Carl & Koster, Hans R.A. & Moizeau, Fabien & Thisse, Jacques-François, 2022. "Who lives where in the city? Amenities, commuting and income sorting," Journal of Urban Economics, Elsevier, vol. 128(C).

    More about this item

    Keywords

    Urban economics; Quantitative spatial economics; Cities;
    All these keywords.

    JEL classification:

    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

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