We study decentralized and optimal urbanization in a simple multi-sector model of a rural-urban economy focusing on productivity differences and internal trade frictions. We show that even in the absence of the typical externalities studied in the literature, such as agglomeration, congestion or...

We analyze the role of optimal income taxation across different local labor markets. Should labor in large cities be taxed differently than in small cities? We find that a planner who needs to raise revenue and is constrained by free mobility of labor across cities does not choose equal taxes...

Households in real cities are heterogeneous regarding their size and composition. An aspect usually neglected in urban models used to study economic and policy issues that arise in today's cities. We develop an urban general equilibrium model that takes a more complex household structure...

Households in real cities are heterogeneous regarding their size and composition. This implies that the household structure -i.e. the (average) household size, the composition, the relative share of different household types, and the number of households - differs across cities. This aspect is...

Germany like many other European countries subsidize commuting by granting the right to deduct commuting expenses from the income tax base. This regulation has often been changed and has regularly been under debate during the last decades. The pros (e.g. causing efficiency gains with respect to...

Employing a standard matching unemployment model extended by within-labor-market-regions commuting, this paper analyzes the tradeoff between commuting costs and unemployment. Depending on whether commuters are able to bargain for fringe benefits, search may or may not be biased towards distant...

We study the optimal and equilibrium size of cities in a monocentric city model with environmental pollution. Pollution is related to city size through the effect of population on production, commuting, and housing consumption. If pollution is local, we find that equilibrium cities are too...

This paper emphasises the importance of the political-institutional dimension in the understanding of the spatial distribution of economic activity. We introduce the notion of Territorial Authority Scale, which refers to the degree of devolution (towards sub-national tiers of government)...

The paper asks whether subsidies aiming to redistribute economic activity across regions can be justified with the welfare argument. Moreover, different tax systems are compared with respect to the size of the subsidy needed for achieving a certain spatial distribution of economic activity, and...

Combining a spatial equilibrium model with a search-matching unemployment model, this paper analyzes the willingness to pay for regional amenities and the regional quality of life when wages, rents, and unemployment risk compensate for local amenities and disamenities. The results are compared...