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

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

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.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004021.

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Date of creation: 00 Apr 2004
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Handle: RePEc:cor:louvco:2004021
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  1. Haskel, Jonathan & Wolf, Holger, 2001. " The Law of One Price--A Case Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 545-58, December.
  2. Abdel-Rahman, Hesham M. & Anas, Alex, 2003. "Theories of system of cities," Working Papers 2003-08, University of New Orleans, Department of Economics and Finance.
  3. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  4. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July.
  5. Anas, Alex & Arnott, Richard & Small, Kenneth A., 1997. "Urban Spatial Structure," University of California Transportation Center, Working Papers qt835049q3, University of California Transportation Center.
  6. 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.
  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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