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Tinbergen Institute Discussion Paper No. 01-117/3
Tinbergen Institute, Amsterdam and Rotterdam
This paper aims to analyze and depict urban equilibrium from the perspective of acomplex force field between (positive) agglomeration economies and (negative) environmentalexternalities. Based on a simplified representation of a linear urban economy, anarchetypical model based on general equilibrium principles is designed and its propertiesare investigated by using numerical simulations. The model includes a spacious industrial centrein which agglomeration externalities are differentiated over space, and a residential area thatsuffers from pollution which too is differentiated over space. Environmental technology choiceby firms is endogenized. This model is able to generate interesting and sometimescounter-intuitive results for the city under consideration.
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Working Paper

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