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Production Externalities and Urban Configuration

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Author Info
Marcus Berliant () (Department of Economics, Washington University)
Shin-Kun Peng (Academia Sinica, Taipei, ROC and Washington University)
Ping Wang () (Department of Economics, Vanderbilt University)

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Abstract

Jacobs (1969) argues that uncompensated knowledge spillovers have played a crucial role in population agglomeration and thus in the generation of cities. We explore this idea formally by extending the Romer (1986) model of (inter-firm) externalities in production to an explicit spatial context. We postulate that knowledge spillovers between firms decrease with the distance between the firms. A general equilibrium model with households and firms residing in a linear or long, narrow city is constructed. The allocation of goods and factors, the locational choice of firm sites and household residences, as well as factor prices and land rents are all endogenously determined. The equilibrium urban configuration may be concentrated (with monocentric firm locations), dispersed (with completely mixed firm and household locations) or a combination (with incompletely mixed firm and household location), depending on the population of firms as the transportation and firm-interaction parameters. Due to the distance-dependent production externalities, firms will be clustered together in any equilibrium. As a consequence, the duo-centric or any multi-centric urban configuration is never an equilibrium configuration. Moreover, except for a set of parameters of measure zero, the equilibrium urban configuration is unique.

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File URL: http://www.vanderbilt.edu/econ/wparchive/workpaper/vu00-w11.pdf
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File Function: Revised version, 2000
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Paper provided by Department of Economics, Vanderbilt University in its series Working Papers with number 0011.

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Date of creation: Jan 1998
Date of revision: Apr 2000
Handle: RePEc:van:wpaper:0011

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Find related papers by JEL classification:
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  2. Foster, James E & Shorrocks, Anthony F, 1991. "Subgroup Consistent Poverty Indices," Econometrica, Econometric Society, vol. 59(3), pages 687-709, May. [Downloadable!] (restricted)
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  4. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-21, May. [Downloadable!] (restricted)
  5. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August. [Downloadable!] (restricted)
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  6. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 377-393, 01. [Downloadable!] (restricted)
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  7. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December. [Downloadable!] (restricted)
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    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Fujita, Masahisa & Thisse, Jacques-Francois, 1986. "Spatial Competition with a Land Market: Hotelling and Von Thunen Unified," Review of Economic Studies, Blackwell Publishing, vol. 53(5), pages 819-41, October. [Downloadable!] (restricted)
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  10. Fujita, Masahisa & Ogawa, Hideaki, 1982. "Multiple equilibria and structural transition of non-monocentric urban configurations," Regional Science and Urban Economics, Elsevier, vol. 12(2), pages 161-196, May. [Downloadable!] (restricted)
  11. Berliant, Marcus & Fujita, Masahisa, 1992. "Alonso's Discrete Population Model of Land Use: Efficient Allocations and Competitive Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 535-66, August. [Downloadable!] (restricted)
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  12. Palivos, Theodore & Wang, Ping, 1996. "Spatial agglomeration and endogenous growth," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 645-669, December. [Downloadable!] (restricted)
  13. Abdel-Rahman, Hesham M. & Wang, Ping, 1997. "Social Welfare and Income Inequality in a System of Cities," Journal of Urban Economics, Elsevier, vol. 41(3), pages 462-483, May. [Downloadable!] (restricted)
  14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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  1. Miguel Angel Garcia Lopez & Ivan Muñiz Olivera, 2005. "El impacto espacial de las economías de aglomeración y su efecto sobre la estructura urbana.El caso de la industria en Barcelona, 1986-1996," Working Papers wpdea0509, Department of Applied Economics at Universitat Autonoma of Barcelona. [Downloadable!]
  2. Esteban Rossi-Hansberg, 2004. "Optimal Urban Land Use and Zoning," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 69-106, January. [Downloadable!] (restricted)
  3. Marcus Berliant & Robert R. Reed III & Ping Wang, 2005. "Knowledge Exchange, Matching, and Agglomeration," Urban/Regional 0506013, EconWPA, revised 07 Jul 2005. [Downloadable!]
    Other versions:
  4. Alexander E. Saak, 2003. "Spatial Arrangements of Externality Generating and Receiving Activities," Food and Agricultural Policy Research Institute (FAPRI) Publications 03-wp348, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
  5. Alexander E. Saak, 2004. "Equilibrium and Efficient Land-Use Arrangements under Spatial Externality on a Lattice," Food and Agricultural Policy Research Institute (FAPRI) Publications 04-wp376, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
  6. Alexander E. Saak, 2003. "Spatial Arrangements of Externality Generating and Receiving Activities," Center for Agricultural and Rural Development (CARD) Publications 03-wp348, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  7. Simon C. Parker, 2005. "Entrepreneurship Among Married Couples in the United States: A Simultaneous Probit Approach," IZA Discussion Papers 1712, Institute for the Study of Labor (IZA). [Downloadable!]
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  8. Marcus Berliant & Fan- chin Kung, 2004. "The Indeterminacy of Equilibrium City Formation under Monopolistic Competition and Increasing Returns," Urban/Regional 0407011, EconWPA, revised 29 Apr 2005. [Downloadable!]
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  9. Marcus Berliant & Ping Wang, 2004. "Dynamic Urban Models: Agglomeration and Growth," Urban/Regional 0404006, EconWPA. [Downloadable!]
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  10. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Marcus Berliant & Ping Wang, 2005. "Urban Growth and Subcenter Formation: A Trolley Ride from the Staples Center to Disneyland and the Rose Bowl," Urban/Regional 0511012, EconWPA. [Downloadable!]
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  12. Saak, Alexander, 2003. "Spatial Arrangements of Externality Generating and Receiving Activities," Staff General Research Papers 10909, Iowa State University, Department of Economics. [Downloadable!]
  13. Alexander E. Saak, 2004. "Equilibrium and Efficient Land-Use Arrangements under Spatial Externality on a Lattice," Center for Agricultural and Rural Development (CARD) Publications 04-wp376, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  14. Saak, Alexander, 2004. "Equilibrium and Efficient Land-Use Arrangements under Spatial Externality on a Lattice," Staff General Research Papers 12211, Iowa State University, Department of Economics. [Downloadable!]
  15. Ivan Muñiz Olivera & Anna Galindo & Miguel Angel Garcia Lopez, 2005. "Descentralisation, Integration and polycentrism in Barcelona," Working Papers wpdea0512, Department of Applied Economics at Universitat Autonoma of Barcelona. [Downloadable!]
  16. Matthew Turner, 2003. "Landscape Preferences and Patterns of Residential Development," Working Papers mturner-03-01, University of Toronto, Department of Economics. [Downloadable!]
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  17. Ivan Muñiz Olivera & Miguel Angel Garcia Lopez, 2005. "Descentralización, integración y policentrismo en Barcelona," Working Papers wpdea0505, Department of Applied Economics at Universitat Autonoma of Barcelona. [Downloadable!]
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