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Environmental Policy and the Collapse of the Monocentric City

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  • Efthymia Kyriakopoulou
  • Anastasios Xepapadeas

Abstract

We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of pollution - acts as a centrifugal force, while positive knowledge spillovers and a site with natural cost advantage act as centripetal forces. We study the agglomeration e ects caused by trade-o s between centripetal and centrifugal forces which eventually determine the distribution of economic activity across space. The rational expectations market equilibrium with spatially myopic environmental policy results either in a monocentric or in a polycentric city with the major cluster at the natural advantage site. The regulator�s optimum results in a bicentric city which suggests that when environmental policy is spatially optimal, the natural advantage sites do not act as attractors of economic activity.

Suggested Citation

  • Efthymia Kyriakopoulou & Anastasios Xepapadeas, 2010. "Environmental Policy and the Collapse of the Monocentric City," DEOS Working Papers 1021, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:1021
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    Cited by:

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    More about this item

    Keywords

    Agglomeration; Space; Environmental policy; Natural cost advantage; Knowledge spillovers; Monocentric-bicentric city;
    All these keywords.

    JEL classification:

    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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