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Congestion, agglomeration, and the structure of cities

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  • 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Superseded by Working Paper 16-13.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
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    Citations

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    Cited by:

    1. 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.
    2. Satyajit Chatterjee & Burcu Eyigungor, 2017. "A Tractable City Model For Aggregative Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 127-155, February.
    3. Hoyt Bleakley & Jeffrey Lin, 2015. "History and the Sizes of Cities," American Economic Review, American Economic Association, vol. 105(5), pages 558-563, May.
    4. Jordan Rappaport, 2014. "A quantitative system of monocentric metros," Research Working Paper RWP 14-3, Federal Reserve Bank of Kansas City.
    5. Jeffrey Brinkman, 2014. "Location dynamics: a key consideration for urban policy," Business Review, Federal Reserve Bank of Philadelphia, issue 1, pages 9-15.
    6. Duranton, Gilles & Puga, Diego, 2015. "Urban Land Use," 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 467-560, Elsevier.
    7. Ben Dachis, 2013. "Cars, Congestion and Costs: A New Approach to Evaluating Government Infrastructure Investment," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 385, July.
    8. Jordan Rappaport, 2014. "Monocentric city redux," Research Working Paper RWP 14-9, Federal Reserve Bank of Kansas City.

    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

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