Monocentric City

1
Monocentric City
2
Assumptions

• Central export node
• All employment concentrated in core
• Steeper bid-rent for businesses than residences
• Single transportation mode

3
Equilibrium

• Land allocated to highest bidder
• No business or household has incentive to
  relocate

4
Land Use in Monocentric City

• Office firm will be highest bidder within 1 mile
  of center
• Residential use between 1 and 3 miles of center
• Farms beyond 3 miles

5
Implications

• Separation of different types of land uses
• House prices decline with distance from center
• House size increases with distance from center
• Commuting time increases with distance from
  center
• All employment concentrated in core.

6
Introduction of Street Car (Partial Equilibrium)

• Reduces commuting cost
• Changes slope of bid-rent. It becomes less steep
• Expands boundaries of city because residents will
  now outbid farmers for land at edge
• Residents also will outbid businesses for land
  near CBD border

7
Decrease in Commuting Cost
8
Effect of Decrease in Commuting Costs

• Before
• Office 0-1 mile
• Residential 1-3
• Farm 3
• Land rent at CBD boundary 8,000

• After
• Office 0-0.826
• Residential 0.826-3.5
• Farm 3.5
• Land Rent at CBD boundary 8941 (approx)

9
General Equilibrium

• Labor supply Labor demand
• Expansion of residential district increases labor
  supply Shrinkage of CBD decreases labor demand
• Excess supply of labor depresses wages
• In response, bid-rent of office firm will shift
  up bid-rent of residential shift down.
• Workers have lower commute cost,but also lower
  wages. Landowners benefit.

10
Income Segregation (Alonso-Muth)

• Land consumption and commuting cost increase with
  income.
• If income elasticity of demand for land is large
  relative to income elasticity of commuting cost,
  then rich choose to live further from center than
  will poor.
• Wheatons findings suggests elasticities same.

11
Alonso-Muth Theory of Income Segregation