[Show abstract][Hide abstract] ABSTRACT:
This paper aims to analyze and depict urban equilibrium from the perspective of a complex force field between (positive) agglomeration economies and (negative) environmental externalities. Based on a simplified representation of a linear urban economy, an archetypical model based on general equilibrium principles is designed and its properties are investigated by using numerical simulations. The model includes a spacious industrial centre in which agglomeration externalities are differentiated over space, and a residential area that suffers from pollution which too is differentiated over space. Environmental technology choice by firms is endogenized. This model is able to generate interesting and sometimes counter-intuitive results for the city under consideration.