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Trade costs versus urban costs. Do jobs move to the suburbs or to the sticks ?

Author

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  • CAVAILHÈS, Jean
  • GAIGNÉ, Carl
  • THISSE, Jacques-François

Abstract

We analyze how the interplay between urban costs, wage wedges, and trade costs may affect the interregional location of firms as well as the intraurban location, within the central business district or in a secondary employment center (SEC) of the selected region. In this way, we investigate, on the one hand, how trade may affect the internal structure of cities and, on the other hand, how decentralizing the production and consumption of goods to subcenters changes the intensity of trade by allowing large metropolitan areas to maintain their predominance. We show that, despite low commuting costs, SECs may emerge when the urban population is large and communication technologies are efficient, two features that seem to characterize modern economies. Moreover, when trade costs fall from high levels, the economy moves gradually from dispersion to agglomeration, favoring the formation of SECs. However, in an integrating world, the center of a small monocentric city could be more attractive than subcenters of large polycentric cities. Nevertheless, the core retains its predominance through the relative growth of its main center, which occurs at the expense of its subcenters.

Suggested Citation

  • CAVAILHÈS, Jean & GAIGNÉ, Carl & THISSE, Jacques-François, 2004. "Trade costs versus urban costs. Do jobs move to the suburbs or to the sticks ?," CORE Discussion Papers 2004021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2004021
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-2004.html
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    References listed on IDEAS

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    1. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, pages 1426-1464.
    2. Abdel-Rahman, Hesham M. & Anas, Alex, 2004. "Theories of systems of cities," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 52, pages 2293-2339 Elsevier.
    3. Holmes, Thomas J. & Stevens, John J., 2004. "Spatial distribution of economic activities in North America," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 63, pages 2797-2843 Elsevier.
    4. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, December.
    5. Haskel, Jonathan & Wolf, Holger, 2001. " The Law of One Price--A Case Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 545-558, December.
    6. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-342, April.
    7. Timothy, Darren & Wheaton, William C., 2001. "Intra-Urban Wage Variation, Employment Location, and Commuting Times," Journal of Urban Economics, Elsevier, vol. 50(2), pages 338-366, September.
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    Citations

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    Cited by:

    1. Carl Gaigné & Jacques-François Thisse, 2006. "Mondialisation, concurrence et métropoles," Revue d'Économie Financière, Programme National Persée, vol. 86(5), pages 47-64.
    2. Bureau, Jean-Christophe, 2006. "Freer International Trade and the Consequences for EU rural areas," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 6(12).
    3. Jens Suedekum, 2006. "Agglomeration And Regional Costs Of Living," Journal of Regional Science, Wiley Blackwell, vol. 46(3), pages 529-543.

    More about this item

    Keywords

    city structure; polycentric city; commuting costs; trade costs; relocation;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • 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

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