City with forward and backward linkages
This paper considers the spatial structure of a city subject to final demand and vertical linkages. Individuals consume differentiated goods (or services) and firms purchase differentiated inputs (or services) in product (or service) markets where forms compete under monopolistic competition. Workers rent their residential lots in an urban land market and contribute to the production of differentiated goods and inputs. We show that firms and workers co-agglomerate and endogenously form a city. We characterize and discuss the spatial distribution of firms and consumers in such cities on one- and two-dimensional spaces (linear city and planar city). We show that final demand and vertical linkages raise the urban density and reduce the city spread. We finally show that a city is too much dispersed compared to the social optimum.
|Date of creation:||2010|
|Date of revision:|
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- PICARD, Pierre M. & ZENG, Dao-Zhi, .
"Agricultural sector and industrial agglomeration,"
CORE Discussion Papers RP
1893, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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