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URBAN DYNAMICS AND GROWTH Advances in Urban Economics Edited by Roberta Capello Dept. of Management, Economics & Industrial Engineering Politecnico di Milano Milano, Italy and Peter Nijkamp Dept. of Spatial Economics Free University

  1. URBAN DYNAMICS AND GROWTH Advances in Urban Economics Edited by Roberta Capello Dept. of Management, Economics & Industrial Engineering Politecnico di Milano Milano, Italy and Peter Nijkamp Dept. of Spatial Economics Free University Amsterdam, The Netherlands 2004 ELSEVIER Amsterdam - Boston - Heidelberg - London - New York - Oxford Paris - San Diego - San Francisco - Singapore - Sydney - Tokyo c

  2. CONTENTS List of Contributors v Chapter 1 The Theoretical and Methodological Toolbox of Urban Economics: From and Towards Where? 1 Roberta Capello and Peter Nijkamp 1.1. Pathways in regional science and urban economics 2 1.2. The role of urban economics in regional science 4 1.3. Advances in urban economics: recent theoretical and methodological directions 6 1.3.1. Prefatory remarks 6 1.3.2. Tendencies in theory 6 1.3.3. Tendencies in models and methods 13 1.4. Urban economics and regional science transition 16 1.5. Hurdles to be crossed 19 1.6. Reasons and structure of the volume 20 References 24 PART 1 AGGLOMERATION Chapter 2 Urban Scale Economies: Statics and Dynamics 31 Philip McCann 2.1. Introduction 31 2.2. Cities, returns to scale and agglomeration 33 2.3. Cities, innovation and firm creation 37 2.4. Clusters, firm types and the nature of transactions 40 2.5. The empirics of cities 45 2.6. Conclusions 52 References 53 Chapter 3 Beyond Optimal City Size: Theory and Evidence Reconsidered 57 Roberta Capello 3.1. Introduction 57 3.2. Optimal city size: an old and still unsolved issue 59

  3. 3.3. New paradigms for an old problem 62 3.3.1. The neoclassical and Christailerian city 62 3.3.2. The network city 66 3.4. Traditional empirical analyses: the aspatial city 70 3.5. Recent empirical analyses: city size and environmental aspects 74 3.6. Recent empirical analyses: the specialised city in an urban system 77 3.7. Concluding remarks 81 References 82 Chapter 4 Spatial Externalities and the Urban Economy 87 Erik T. Verhoef and Peter Nijkamp 4.1. Cities in perspective 88 4.2. Urban externalities 91 4.3. An overview of urban externalities studies 95 4.3.1. Theoretical studies 96 4.3.2. Towards empirical studies 98 4.4. A modelling framework for urban externalities: analysing first-best and second-best policies for multiple externalities 100 4.4.1. The analytical model 102 4.4.2. A numerical example: base-case equilibrium 109 4.4.3. First-best regulation 112 4.4.4. Second-best regulation 114 4.5. Conclusion 117 References 118 Chapter 5 Uncertainty, Social Capital and Community Governance: The City as a Milieu 121 Roberto Camagni 5.1. Introduction: complexity and uncertainty 122 5.2. Uncertainty and the concept of local milieu 124 5.3. Relational capital as a crucial constituent of the local milieu 129 5.4. The city as a milieu 134 5.4.1. The conditions for a comparison 134 5.4.2. The economic role of the city and a taxonomy of urban agglomeration advantages 137 5.4.3. The theoretical relationships between the Milieu and the City 140 5.5. Towards a new urban governance: the tool of strategic planning 143 5.6. Conclusions 147 References 147

  4. XI PART 2 ACCESSIBILITY Chapter 6 Land-use, Transportation and Urban Development 153 Ken J. Button, Peter Nijkamp and Piet Rietveld 6.1. Introduction 154 6.2. Linking land-use and transport 155 6.3. The distant past - up to the mid-1980s 158 6.4. Congestion and pricing of transportation infrastructure 162 6.5. Investment in transportation infrastructure 166 6.6. Transportation, information and land-use 169 6.7. Transportation demand modeling 172 6.8. Conclusions 174 References 174 Chapter 7 Transport Systems and Urban Equilibrium 181 Ears Eundqvist 7.1. Introduction 182 7.2. Equilibrium and optimum in urban systems analysis 183 7.3. Transport systems and urban land use in simplified urban geographies 185 7.3.1. Symmetric continuous space: optimum and equilibrium 185 7.3.2. Symmetric discrete space: optimum and equilibrium 190 7.4. Transport systems and urban land use in realistic urban geographies 197 7.4.1. Modular/iterative approaches: optimum and equilibrium 197 7.4.2. Simultaneous/integrated approaches: optimum and equilibrium 202 7.5. Lessons 206 7.6. Research directions 208 References 209 Chapter 8 Intra-metropolitan Agglomeration, Information Technology and Polycentric Urban Development 213 Jungyul Sohn, Geoffrey J.D. Hewings and Tschangho John Kim 8.1. Introduction 213 8.2. Spatial clustering of economic activities 216 8.3. Information technology and urban spatial structure 220 8.4. Spatial simultaneous equation systems 223 8.5. Regressions for attraction and spillover effects 226 8.6. Study area: Seoul metropolitan region 231

  5. XII 8.7. Intra-metropolitan agglomeration in Seoul 233 8.8. IT impact and polycentric urban development in Seoul 237 8.9. Conclusions 243 References 244 Chapter 9 Dual Earners, Urban Labour Markets and Housing Demand 249 Jan Rouwendal and J. Willemijn Van Der Straaten 9.1. Introduction 250 9.2. Locational choices of couples in the US 251 9.2.1. Summary Costa and Kahn 251 9.2.2. Methodological issues 254 9.2.3. Urban labour market 255 9.3. Location choices of couples in the Netherlands 260 9.3.1. The data 260 9.3.2. Regional division 261 9.3.3. Results 262 9.3.4. Conclusions and comparison 265 9.4. Further empirical analysis 265 9.4.1. Urban wage premium 265 9.4.2. Dual earners and urban wage premium 268 9.4.3. Conclusions so far 269 9.4.4. Dual earners and the housing market 270 9.5. Conclusions 280 References 282 Chapter 10 Land Use Regulation and Its Impact on Welfare 285 Stephen Sheppard 10.1. Introduction 285 10.2. Evolution of the literature 288 10.2.1. Theoretical analysis of the efficiency of land use regulation 289 10.2.2. Other possible effects 293 10.3. A 'canonical' model of land use control 294 10.4. Extending the model: potentially beneficial land use regulation 302 10.5. Empirical studies of land use regulation 307 10.5.1. Data and empirical evidence 308 10.5.2. Assessing the impact of land use regulation 311 10.5.3. Distributional impacts 312 10.6. Conclusion 314 References 315

  6. Xlll PART 3 SPATIAL INTERACTION, MIGRATION AND COMMUTING Chapter 11 Spatial Interaction Models: From the Gravity to the Neural Network Approach 319 Manfred M. Fischer and Aura Reggiani 11.1. Introduction 319 11.2. Context and analytical framework 320 11.2.1. The generic spatial interaction model of the gravity type 322 11.2.2. Specification of the deterrence function 324 11.2.3. Four different cases 324 11.3. The statistical equilibrium 327 11.4. The choice-theoretic approach 330 11.5. The neural network approach 334 11.5.1. The unconstrained case of neural spatial interaction modelling 335 11.5.2. The class of singly constrained neural spatial interaction models 336 11.5.3. The modelling process 337 11.5.4. The network learning problem and parameter estimation procedures 338 11.6. Concluding remarks 342 References 343 Chapter 12 Commuting: The Contribution of Search Theory 347 Jos van Ommeren 12.1. Introduction 347 12.2. Search theory 350 12.2.1. The basic assumption 350 12.2.2. The optimal strategy 352 12.2.3. Moving behaviour 355 12.2.4. The optimal reservation wage strategy 355 12.2.5. Adaptions and extensions 360 12.2.6. Marginal willingness to pay 368 12.2.7. Geographical structure 370 12.3. The observed commuting costs distribution 372 12.4. Conclusion 375 References 375 Chapter 13 Ethnic Concentration and Human Capital Formation 381 Thomas de Graaff and Henri L.F. de Groot 13.1. Introduction 382 13.2. A model of migration and human capital accumulation 385

  7. XIV 13.2.1. The economy 387 13.2.2. Endogenous migration 391 13.3. Within-country homogeneous human capital 393 13.4. Heterogeneous human capital and migration 396 13.4.1. Negative impact of the neighborhood 399 13.4.2. Positive impact of the neighborhood 400 13.5. Conclusion 402 Appendix A13. Comparative statics 403 Appendix B13. Human capital accumulation when migration costs do not depend on human capital 405 References 407 PART 4 URBAN HIERARCHY Chapter 14 Advanced Insights in Central Place Theory 413 Shin-Kun Peng 14.1. Introduction 414 14.2. Central place theory 416 14.3. The existence of a monocentric configuration 420 14.4. The emergence of urban system 427 14.5. The rank-size distribution in an urban hierarchy 432 14.6. Conclusions 438 References 438 Chapter 15 The City System Paradigm: New Frontiers 443 Hesham M. Abdel-Rahman 15.1. Introduction 444 15.2. The internal structure of the city 448 15.3. Agglomeration economies and city systems 452 15.3.1. Equilibrium system of cities 453 15.3.2. Institutional city formation mechanisms 454 15.4. Identical cities without trade 456 15.4.1. Public good 457 15.4.2. Marshallian externality 459 15.4.3. Differentiated intermediate input 461 15.4.4. Differentiated consumption good 465 15.5. Specialization and trade 468 15.6. Specialization vs. diversification 471 15.6.1. Cross-product externality 471 15.6.2. Transportation costs 472 15.6.3. Economy of scope 474 15.6.4. Product cycle 478

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