Firm suburbanization and urban subcenters

Abstract

The theory of firm location within an urban area is extended to consider a city in which firms can export their output via a suburban terminal as well as via the usual CBD terminal. Firms benefit from suburbanization since freight transport costs are reduced and since they can pay lower wages, but labor may be scarce in the suburbs. This forces suburban firms to readjust their wages, causing some workers to out-commute and giving all workers an incentive to relocate. The existence of an employment subcenter under labor scarcity conditions is shown to cause household utility levels to rise, the size of the metropolitan area to increase, and overall urban land value to change indeterminately. Finally, determination of the optimal location for a suburban terminal is considered.