Abstract
This paper develops a spatial equilibrium model for a competitive two-city system consisting of a high-income and a low-income city. Using this model, we investigate the effects of intracity and intercity commuting subsidies on such urban performances as spatial structures, residents’ utility, and social welfare of cities and the system. The three unilateral subsidy scenarios and two subsidy competition scenarios are investigated individually. Results show that intercity commuting subsidy gives residents incentives to reside in the low-income city and intercity commuting to the high-income city, while intracity commuting subsidies lead to the inflow of population. Subsidy competitions increase residents’ utility and mitigate the impacts of unilateral subsidies on the social welfare of the system. A numerical example and case study based on city pairs of Jing-Jin-Ji Urban Agglomeration in China are conducted to examine the proposed model.
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