Accuracy and efficiency in simulating equilibrium land-use patterns for self-organizing cities

xiaofang dong, ross, l. stephen;

Lucas and Rossi-Hansberg (L&RH) (2002, Econometrica, 70: 1445�1476) and Fujita and Ogawa (F&O) (1982, Regional Science and Urban Economics, 12: 161�196, 1989, Environment and Planning A, 21: 363�374) develop urban models in which economic activity self-organizes due to spillovers in production. However, F&O (1982,
Regional Science and Urban Economics, 12: 161�196, 1989, Environment and Planning A, 21: 363�374) show that rents and employment density are flat or falling as the city center is approached, while in the simulations of L&RH (2002, Econometrica, 70: 1445�1476), rents rise at an increasing rate toward the center suggesting a concentration of employment near the center. For the Lucas and Rossi-
Hansberg model, we prove that land rents and density must be flat or falling near the center. We explain how using a polar coordinate system when approximating a twodimensional integral can create systematic imprecision in their simulations, and then present revised simulations. The proofs and simulations suggest that in urban models where economic activity self-organizes firms do not unduly cluster at the center of a central business district even in monocentric equilibria.