Where It Is Better to Live: In an "European" or an "American" City?

We start from the well known fact that, in most European cities, central locations are occupied by rich households; while in American cities, they are occupied by poor households. This paper tries to answer to the question: witch type of urban structure is better for the households, an European or an American one? We are using a dynamic residential model, where the spatial repartition of amenities is endogenously modified by the spatial repartition of social groups. At every period, the equilibrium spatial structure of the city is determined by the transport costs and by the spatial repartition of amenities; but, between periods, the spatial repartition of amenities changes, rich households generating local amenities in the locations they occupy, and then the spatial structure of the city changes. For every combination of utility level, or for every population size, the city may have several long term equilibria. We explicitly analyse two of them: an “American equilibrium†with the poor living in the centre and the rich in the periphery, and a “European equibrium†with the rich living in the centre and the poor in the periphery. We analyze these equilibriums in two situations (open-city and closed-city) and, in both cases, we compare the two equilibria from an efficiency point of view. The results show that in both cases, an American structure is more efficient.