The general equilibrium effects of congestion externalities |
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Authors: | Arthur M. Sullivan |
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Affiliation: | Graduate School of Administration/Department of Economics, University of California, Davis, California 95616 U.S.A. |
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Abstract: | This is the second in a series of three articles on the topic of congestion externalities. We use an urban general-equilibrium model to compute two types of cities: the market-equilibrium city, in which congestion externalities occur, and the optimum city. The optimum city has a more dispersed distribution of employment, and a more concentrated distribution of residence. If the population of the city is fixed, the optimum pricing of transportation generates a per capita welfare gain of $3.78 per week. If the population of the city is endogenous, the internalization of congestion externalities causes the city to grow. |
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