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A General Equilibrium Model of Australia's Premier City

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  • J. Mark Horridge

Abstract

Australian cities suffer from urban sprawl, leading to long average commute distances and high energy use by urban transport. To investigate this problem, we define and construct a medium-sized general equilibrium model of Australia's second-largest city, Melbourne. Individuals are modelled as utility maximisers who face a discrete number of choices. We follow the logit approach, where the probability of an individual pursuing an option (for example, living in high-density housing in zone A while working in zone B) is proportional to the utility derived from that option, taking into account the cost of the option and the effect of this cost on the total utility obtainable with given income-producing opportunities. The spatial layout of the city, through the cost of travel from one zone to another, influences the pattern of land rents, industrial activity, and housing location and density. As in other general equilibrium models, market-clearing and accounting equations allow the whole economy of the city to be presented within an integrated framework. The result is a fairly general economic model of urban land use and travel demands. We use it to analyse the effects of population growth and policy initiatives on transport usage. This paper was originally presented to the Australian Conference in Applied General Equilibrium Modelling, University of Melbourne (May 1991), then published as Centre of Policy Studies Discussion Paper No. D149 (July 1991), then, retitled 'A general equilibrium model of Australia's second largest city' as IAESR working paper no. 1991/2 (September)[ https://catalogue.nla.gov.au/Record/1421228] and in 1994 published as 'A Computable General Equilibrium Model of Urban Transport Demands' in the Journal of Policy Modeling. It was reissued as CoPS/IMPACT Working Paper Number IP-74 in October 1999.

Suggested Citation

  • J. Mark Horridge, 1991. "A General Equilibrium Model of Australia's Premier City," Centre of Policy Studies/IMPACT Centre Working Papers ip-74, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:ip-74
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    Cited by:

    1. Leonardo Mastronardi & Carlos Adrián Romero & Omar Osvaldo Chisari, 2012. "Local taxes in Buenos Aires City: a general equilibrium effects," EcoMod2012 3879, EcoMod.
    2. Fumitoshi Mizutani & Noriyoshi Nakayama & Tomoyasu Tanaka, 2015. "An Analysis of the Effects of the Compact City on Economic Activities in Japan," ERSA conference papers ersa15p160, European Regional Science Association.
    3. Mastronardi, Leonardo Javier, 2013. "Federalismo fiscal en Argentina: Un análisis de efectos spillover mediante un CGE regional [Fiscal Federalism in Argentina: An analysis of spillover effects using a regional CGE]," MPRA Paper 54376, University Library of Munich, Germany.
    4. Rodriguez, U-Primo E., 2007. "State-of-the-Art in Regional Computable General Equilibrium Modelling with a Case Study of the Philippines," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 20(1).
    5. Francois Jacobus Stofberg & Jan Van Heerden, 2016. "The Short-Term Economic Impact of Levying E-Tolls on Industries," South African Journal of Economics, Economic Society of South Africa, vol. 84(4), pages 574-593, December.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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