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Equilibrium land use in a linear city with a central shopping district

Author

Listed:
  • Liliana Garrido-da-Silva

    (CMUP and Faculdade de Economia da Universidade do Porto)

  • João Correia-da-Silva

    (CEF.UP and Faculdade de Economia da Universidade do Porto)

  • Sofia B. S. D. Castro

    (CMUP, CEF.UP and Faculdade de Economia da Universidade do Porto)

Abstract

We investigate the equilibrium pattern of residential, business and integrated areas in a city where households and firms have employment and trade relationships. The employment relationship requires commuting, and thus generates an attraction between firm-household pairs. The trade relationship requires firms to transport output to the central shopping district and requires households to travel to the central shopping district for consumption. As a result, it attracts households and firms to the centre. The equilibrium pattern that emerges depends on the relative magnitude of three different urban transport costs (commuting cost, output transport cost, shopping cost), and on the relative convexity of households’ and firms’ benefits from locating near the centre. As the distance from the centre increases, if households’ marginal benefit from locating near the centre diminishes more rapidly (or increases less rapidly) than firms’ marginal benefit, business areas can only emerge at the centre or at the city limits. In the opposite case, residential areas can only emerge at the centre or at the city limits. With linear commuting costs and inelastic use of land and labour, there are 11 possible symmetric equilibrium land use patterns. Additional patterns arise if these assumptions are relaxed.

Suggested Citation

  • Liliana Garrido-da-Silva & João Correia-da-Silva & Sofia B. S. D. Castro, 2025. "Equilibrium land use in a linear city with a central shopping district," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 80(4), pages 1041-1084, December.
    • Handle: RePEc:spr:joecth:v:80:y:2025:i:4:d:10.1007_s00199-025-01650-8
    DOI: 10.1007/s00199-025-01650-8
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    References listed on IDEAS

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    1. Garrido-da-Silva, Liliana & Correia-da-Silva, João, 2025. "Socially optimal land use in a city with central amenities," Regional Science and Urban Economics, Elsevier, vol. 115(C).

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    Keywords

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    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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