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Optimal Cities with Indivisibility in Production and Interactions Between Firms

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  • Yoshitsugu Kanemoto

Abstract

A spatial model of cities is constructed by combining interaction costs between firms with indivisibility in production. The optimal allocation requires Pigouvian subsidies to firms and the externality version of the Henry George Theorem is obtained: at the optimal city size, the total Pigouvian subsidy equals the total differential land rent in a city. We also obtain conditions under which monocentric configuration is optimal and perform comparative statics concerning changes in various parameters on the optimal city size.

Suggested Citation

  • Yoshitsugu Kanemoto, 1985. "Optimal Cities with Indivisibility in Production and Interactions Between Firms," Working Papers 597, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:597
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    References listed on IDEAS

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    1. Engle, Robert F., 1982. "A general approach to lagrange multiplier model diagnostics," Journal of Econometrics, Elsevier, pages 83-104.
    2. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, pages 305-325.
    3. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, pages 305-325.
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    Cited by:

    1. Berg, Nathan, 2008. "Imitation in location choice," MPRA Paper 26592, University Library of Munich, Germany.
    2. Sabyasachi TRIPATHI, 2014. "Estimating Urban Agglomeration Economies for India: A New Economic Geography Perspective," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, pages 5-34.
    3. Bazhanov, Andrei & Hartwick, John, 2006. "Dispersed Interactions of Urban Residents," MPRA Paper 766, University Library of Munich, Germany.
    4. Yoshitsugu Kanemoto, 2011. "Second-Best Cost-Benefit Analysis with a Microfoundation of Urban Agglomeration," ERSA conference papers ersa11p439, European Regional Science Association.
    5. Yoshitsugu Kanemoto, 2011. "Second-Best Cost-Benefit Analysis with a Microfoundation of Urban Agglomeration," ERSA conference papers ersa11p439, European Regional Science Association.
    6. Kanemoto, Yoshitsugu, 2013. "Second-best cost–benefit analysis in monopolistic competition models of urban agglomeration," Journal of Urban Economics, Elsevier, vol. 76(C), pages 83-92.
    7. Ito, Junichi, 2002. "Why TVES have contributed to interregional imbalances in China:," EPTD discussion papers 91, International Food Policy Research Institute (IFPRI).
    8. John Hartwick & Andrei Bazhanov, 2007. "On Beckmann's Dispersed "Interaction City"," Working Papers 1170, Queen's University, Department of Economics.
    9. Yoshitsugu Kanemoto, 2012. "Cost-Benefit Analysis in Monopolistic Competition Models of Urban Agglomeration," GRIPS Discussion Papers 12-04, National Graduate Institute for Policy Studies.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

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