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Negative Externality, Heterogeneous Individuals and the Systems of Cities


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  • Unimonen, S.
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    This paper analyzes a local pollution problem in a club framework. Polluting firms and their labor force form a system of cities. Emissions are created as a byproduct by the firm, and the deterioration of the environment is suffered by the residents of the city. The model has two types of individual who deffer in their preferences and productive skills. The paper determines when cities with homogeneous, mixed or partially mixed populations are optimal. Utilizing a competitive developer model, the paper also examines the existence and nature of equilibrium. It is shown that an efficient solution to the externality problem is attained by competitive forces alone without the intervention of the government.

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    Bibliographic Info

    Paper provided by Department of Economics in its series University of Helsinki, Department of Economics with number 490.

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    Length: 23 pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:fth:helsec:490

    Contact details of provider:
    Postal: University of Helsinki; Department of Economics, P.O.Box 54 (Unioninkatu 37) FIN-00014 Helsingin Yliopisto
    Phone: +358 9 191 8897
    Fax: +358 9 191 8877
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