IDEAS home Printed from https://ideas.repec.org/p/fip/fedpwp/13-25.html
   My bibliography  Save this paper

Congestion, agglomeration, and the structure of cities

Author

Listed:
  • Jeffrey Brinkman

Abstract

Superseded by Working Paper 16-13. Congestion pricing has long been held up by economists as a panacea for the problems associated with ever increasing traffic congestion in urban areas. In addition, the concept has gained traction as a viable solution among planners, policymakers, and the general public. While congestion costs in urban areas are significant and clearly represent a negative externality, economists also recognize the advantages of density in the form of positive agglomeration externalities. The long-run equilibrium outcomes in economies with multiple correlated, but offsetting, externalities have yet to be fully explored in the literature. To this end, I develop a spatial equilibrium model of urban structure that includes both congestion costs and agglomeration externalities. I then estimate the structural parameters of the model by using a computational solution algorithm and match the spatial distribution of employment, population, land use, land rents, and commute times in the data. Policy simulations based on the estimates suggest that naive optimal congestion pricing can lead to net negative economic outcomes.

Suggested Citation

  • Jeffrey Brinkman, 2013. "Congestion, agglomeration, and the structure of cities," Working Papers 13-25, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:13-25
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
    3. Xiaofang Dong & Stephen L. Ross, 2015. "Accuracy and efficiency in simulating equilibrium land-use patterns for self-organizing cities," Journal of Economic Geography, Oxford University Press, vol. 15(4), pages 707-722.
    4. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1426-1464, September.
    5. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    6. Esteban Rossi-Hansberg, 2004. "Optimal Urban Land Use and Zoning," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 69-106, January.
    7. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 377-393, May.
    8. Piazzesi, Monika & Schneider, Martin & Tuzel, Selale, 2007. "Housing, consumption and asset pricing," Journal of Financial Economics, Elsevier, vol. 83(3), pages 531-569, March.
    9. Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2015. "The Economics of Density: Evidence From the Berlin Wall," Econometrica, Econometric Society, vol. 83, pages 2127-2189, November.
    10. Gilles Duranton & Matthew A. Turner, 2011. "The Fundamental Law of Road Congestion: Evidence from US Cities," American Economic Review, American Economic Association, vol. 101(6), pages 2616-2652, October.
    11. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
    12. Arnott, Richard, 2007. "Congestion tolling with agglomeration externalities," Journal of Urban Economics, Elsevier, vol. 62(2), pages 187-203, September.
    13. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December.
    14. Marcy Burchfield & Henry G. Overman & Diego Puga & Matthew A. Turner, 2006. "Causes of Sprawl: A Portrait from Space," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 587-633.
    15. Jan K. Brueckner, 2002. "Airport Congestion When Carriers Have Market Power," American Economic Review, American Economic Association, vol. 92(5), pages 1357-1375, December.
    16. Glaeser, Edward L. & Kahn, Matthew E., 2004. "Sprawl and urban growth," 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 56, pages 2481-2527, Elsevier.
    17. Mohammad Arzaghi & J. Vernon Henderson, 2008. "Networking off Madison Avenue," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(4), pages 1011-1038.
    18. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
    19. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
    20. Thorsnes, Paul, 1997. "Consistent Estimates of the Elasticity of Substitution between Land and Non-Land Inputs in the Production of Housing," Journal of Urban Economics, Elsevier, vol. 42(1), pages 98-108, July.
    21. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," 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 49, pages 2119-2171, Elsevier.
    22. Morris A. Davis & Jonas D. M. Fisher & Toni M. Whited, 2014. "Macroeconomic Implications of Agglomeration," Econometrica, Econometric Society, vol. 82(2), pages 731-764, March.
    23. David Albouy, 2009. "What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values," NBER Working Papers 14981, National Bureau of Economic Research, Inc.
    24. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," 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 48, pages 2063-2117, Elsevier.
    25. 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.
    26. Christopher Mayer & Todd Sinai, 2003. "Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why Not All Delays Are Evil," American Economic Review, American Economic Association, vol. 93(4), pages 1194-1215, September.
    27. Jeffrey Brinkman & Daniele Coen‐Pirani & Holger Sieg, 2015. "Firm Dynamics In An Urban Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 1135-1164, November.
    28. Satyajit Chatterjee & Burcu Eyigungor, 2012. "A tractable circular city model with an application to the effects of development constraints on land rents," Working Papers 12-25, Federal Reserve Bank of Philadelphia.
    29. Chen, Yong & Rosenthal, Stuart S., 2008. "Local amenities and life-cycle migration: Do people move for jobs or fun?," Journal of Urban Economics, Elsevier, vol. 64(3), pages 519-537, November.
    30. Davis, Morris A. & Heathcote, Jonathan, 2007. "The price and quantity of residential land in the United States," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2595-2620, November.
    31. Tse, Chung Yi & Chan, Alex W. H., 2003. "Estimating the commuting cost and commuting time property price gradients," Regional Science and Urban Economics, Elsevier, vol. 33(6), pages 745-767, October.
    32. Henderson, Vernon & Kuncoro, Ari & Turner, Matt, 1995. "Industrial Development in Cities," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1067-1090, October.
    33. Davis, Morris A. & Palumbo, Michael G., 2008. "The price of residential land in large US cities," Journal of Urban Economics, Elsevier, vol. 63(1), pages 352-384, January.
    34. Anas, Alex & Kim, Ikki, 1996. "General Equilibrium Models of Polycentric Urban Land Use with Endogenous Congestion and Job Agglomeration," Journal of Urban Economics, Elsevier, vol. 40(2), pages 232-256, September.
    35. Gilles Duranton & J. V. Henderson & William C. Strange (ed.), 2015. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 5, number 5.
    36. Small, Kenneth A., 1983. "The incidence of congestion tolls on urban highways," Journal of Urban Economics, Elsevier, vol. 13(1), pages 90-111, January.
    37. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 775-805.
    38. Thomas J. Holmes, 2005. "The Location of Sales Offices and the Attraction of Cities," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 551-581, June.
    39. Wheaton, William C., 2004. "Commuting, congestion, and employment dispersal in cities with mixed land use," Journal of Urban Economics, Elsevier, vol. 55(3), pages 417-438, May.
    40. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July.
    41. Rappaport, Jordan, 2008. "Consumption amenities and city population density," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 533-552, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    2. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853, Elsevier.
    3. Zhang, Wenjia & Kockelman, Kara M., 2016. "Optimal policies in cities with congestion and agglomeration externalities: Congestion tolls, labor subsidies, and place-based strategies," Journal of Urban Economics, Elsevier, vol. 95(C), pages 64-86.
    4. repec:spo:wpmain:info:hdl:2441/1kv8mtgl748r0ahh12air9erdc is not listed on IDEAS
    5. Stef Proost & Jacques-François Thisse, 2019. "What Can Be Learned from Spatial Economics?," Journal of Economic Literature, American Economic Association, vol. 57(3), pages 575-643, September.
    6. repec:hal:spmain:info:hdl:2441/1kv8mtgl748r0ahh12air9erdc is not listed on IDEAS
    7. Mark J. Kutzbach, 2010. "Access to Workers or Employers? An Intra-Urban Analysis of Plant Location Decisions," Working Papers 10-21r, Center for Economic Studies, U.S. Census Bureau, revised Sep 2012.
    8. Jordy Meekes & Wolter H. J. Hassink, 2023. "Endogenous local labour markets, regional aggregation and agglomeration economies," Regional Studies, Taylor & Francis Journals, vol. 57(1), pages 13-25, January.
    9. William R. Kerr & Scott Duke Kominers, 2015. "Agglomerative Forces and Cluster Shapes," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 877-899, October.
    10. Ahlfeldt, Gabriel M. & Barr, Jason, 2022. "The economics of skyscrapers: A synthesis," Journal of Urban Economics, Elsevier, vol. 129(C).
    11. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    12. Carlino, Gerald & Kerr, William R., 2015. "Agglomeration and Innovation," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 349-404, Elsevier.
    13. Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2015. "The Economics of Density: Evidence From the Berlin Wall," Econometrica, Econometric Society, vol. 83, pages 2127-2189, November.
    14. Thisse, Jacques-François & Proost, Stef, 2015. "Skilled Cities, Regional Disparities, and Efficient Transport: The state of the art and a research agenda," CEPR Discussion Papers 10790, C.E.P.R. Discussion Papers.
    15. Gilles Duranton & William R. Kerr, 2015. "The Logic of Agglomeration," Harvard Business School Working Papers 16-037, Harvard Business School.
    16. Diego Puga, 2010. "The Magnitude And Causes Of Agglomeration Economies," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 203-219, February.
    17. William R. Kerr & Frederic Robert-Nicoud, 2020. "Tech Clusters," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 50-76, Summer.
    18. Moretti, Enrico, 2011. "Local Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 14, pages 1237-1313, Elsevier.
    19. Ajay Agarwal & Genevieve Giuliano & Christian Redfearn, 2012. "Strangers in our midst: the usefulness of exploring polycentricity," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 48(2), pages 433-450, April.
    20. Mark J. Kutzbach, 2010. "Access to Workers or Employers? An Intra-Urban Analysis of Plant Location Decisions," Working Papers 10-21, Center for Economic Studies, U.S. Census Bureau, revised Sep 2012.
    21. Holger Sieg & Daniele Coen-Pirani & Jeff Brinkman, 2011. "Agglomeration Externalities and the Dynamics of Firm Location Choices," 2011 Meeting Papers 966, Society for Economic Dynamics.
    22. Akamatsu, Takashi & Mori, Tomoya & Osawa, Minoru & Takayama, Yuki, 2017. "Spatial scale of agglomeration and dispersion: Theoretical foundations and empirical implications," MPRA Paper 80689, University Library of Munich, Germany.

    More about this item

    Keywords

    Externalities (Economics); Urban economics;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedpwp:13-25. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Beth Paul (email available below). General contact details of provider: https://edirc.repec.org/data/frbphus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.