DP14728 Stability and sustainability of urban systems under commuting and transportation costs

Author(s): Kiyohiro Ikeda, Yuki Takayama, Jacques-François Thisse
Publication Date: May 2020
Date Revised: May 2020
Keyword(s): Cities, Commuting costs, Economic Geography, Multiplicity of stable equilibria, Racetrack economy, Transportation Costs
JEL(s): F12, R12
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14728

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.