Abstract
The new urban economics views the urban economy from a general equilibrium perspective. It improves on earlier theories by permitting an integrated treatment of different facets of the urban economy, such as land use, transportation, housing, local public finance, and environmental quality. Its centrepiece is the monocentric city model, which describes a static city with a central business district surrounded by residences. Land rent falls with distance from the centre to offset higher commuting costs, housing density is positively related to land rent, and the equilibrium location of different household groups depends on the premium each is willing to pay per unit area of land for a more central location. The model has been extended to treat urban dynamics with durable structures and infrastructure, and via external scale economies in production to treat polycentric cities.
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