The influence of urban form on spatial costs

There is a general presumption in urban economics that average commuting costs are increasing in city size. By analogy, it might be supposed that other spatial costs, such as distribution costs for utility services or access costs to schools and hospitals, will have the same characteristic. However, the basic commuting result derives from an urban model in which population density is uniform out to the city boundary and commuters travel individually and radially to the central business district. It is more realistic to suppose that population density declines away from the centre, as in the standard monocentric urban model and that there are likely to be scale economies in both commuting (e.g. from use of buses or metros) and distribution (e.g. larger diameter water mains). The aim of this paper is to explore the implications of such factors for spatial costs, using data on water distribution costs for 35 “urban districts” in the supply area of one of the water companies in England & Wales. Distribution cost elasticities are quantified for two contrasting urban development scenarios, confirming that in the case of Suburbanization average distribution costs are increasing in city size, as generally assumed; however, in the case of Densification these costs are decreasing in city size. The interaction with water production costs is also considered, showing that, in the case of Densification, scale economies in production are reinforced by density economies in distribution, whereas in the case of Suburbanisation they are offset to a greater or lesser extent by diseconomies in distribution, i.e. higher spatial costs. A final section relates these findings to the literature on commuting costs, urban agglomeration and sprawl. It is concluded that high density settlement has the potential to reduce average costs in distribution (including commuting) as well as production, so that both favour agglomeration. Accordingly, urban modelers should be cautious about assuming that commuting (and other spatial costs) are always increasing in city size.