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A small model of equilibrium mechanisms in a city

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  • André DE PALMA
  • Stefan PROOST
  • Saskia VAN DER LOO

Abstract

We use a simple economy with two interconnected geographical zones. Individuals can live and work in one of the two zones or can commute between them. This model is used to explore the dynamics of housing and work decisions after a permanent shock in labour demand occurred in one of the two zones. We illustrate the role of the different levels of expectation of developers and government transport agencies for the equilibrium on the housing and the labour markets. The model is used to identify better Cost-Benefit rules for transport investments and the role of coordination between housing and transport decisions.

Suggested Citation

  • André DE PALMA & Stefan PROOST & Saskia VAN DER LOO, 2013. "A small model of equilibrium mechanisms in a city," Working Papers of Department of Economics, Leuven ces13.12, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:ces13.12
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    References listed on IDEAS

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    1. André de Palma & Robin Lindsey & Emile Quinet & Robert Vickerman, 2011. "Handbook Of Transport Economics," PSE-Ecole d'économie de Paris (Postprint) halshs-00754912, HAL.
    2. Anas Alex & Arnott Richard J., 1993. "Technological Progress in a Model of the Housing - Land Cycle," Journal of Urban Economics, Elsevier, vol. 34(2), pages 186-206, September.
    3. André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), 2011. "A Handbook of Transport Economics," Books, Edward Elgar Publishing, number 12679.
    4. Francisco Martínez & Ricardo Hurtubia, 2006. "Dynamic Model for the Simulation of Equilibrium Status in the Land Use Market," Networks and Spatial Economics, Springer, vol. 6(1), pages 55-73, March.
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