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On the sustainability of a monocentric city: Lower transport costs from new transport facilities

Discussion Papers

No.548

January 2016

ABSTRACT

This paper proposes a general equilibrium model of a monocentric city based on Fujita and Krugman (1995). Two rates of transport costs per distance and for the same good are introduced. The model assumes that lower transport costs are available at a few points on a line. These lower costs represent new transport facilities, such as high-speed motorways and railways. Findings is that new transport facilities connecting the city and hinterlands strengthen the lock-in effects, which describes whether a city remains where it is forever after being created. Furthermore, the effect intensifies with better agricultural technologies and a larger population in the economy. The relationship between indirect utility and population size has an inverted U-shape, even if new transport facilities are used. However, the population size that maximizes indirect utility is smaller than that found in Fujita and Krugman (1995).

Keywords: Urban system, Monopolistic competition, Transport facilities
JEL classification: R12, F12, O14

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