Working Paper: CEPR ID: DP14728
Authors: Yuki Takayama; Kiyohiro Ikeda; Jacques-François Thisse
Abstract: This paper explores the conditions for the emergence of a system of cities in a general equilibrium setting that accounts for the mobility of labor, transportation costs between cities and commuting costs within cities. Locations are equally distributed over a circular space. We find that the multiplicity of stable spatial equilibria is the rule and not the exception. Using the concept of stability areas to study the transition from one stable equilibrium to the next, we show that decreasing commuting or transportation costs generate equilibrium paths that may feature a megalopolis or hierarchical system of cities having different sizes. We confirm that transportation and commuting costs have opposite impacts on the space-economy.
Keywords: economic geography; cities; racetrack economy; multiplicity of stable equilibria; commuting costs; transportation costs
JEL Codes: F12; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| decreasing commuting costs (R48) | emergence of multiple stable spatial equilibria (C62) |
| decreasing transportation costs (R41) | emergence of multiple stable spatial equilibria (C62) |
| lower commuting costs (R48) | fewer and larger cities (R12) |
| higher transportation costs (L91) | dispersed pattern of smaller cities (R12) |
| commuting costs (R48) | agglomeration (R11) |
| transportation costs (L91) | dispersion (C46) |
| initial conditions (C62) | stability of urban patterns (R14) |