Travelling for public goods, neighborhood effect and spatial stratification

Abstract

To investigate the spatial stratification of people with heterogeneous incomes, this paper incorporates travelling for public goods and the market friction arising from the minimum area when buying houses into a monocentric model, finding two stratification patterns: mixed stratification wherein people with high and low incomes live in suburbs while middle-income people live in urban areas, and complete stratification in which the wealthy live in urban areas and the poor live in suburbs. When public goods have congestion effect or when the agglomeration effect is small, there is mixed stratification; when the agglomeration effect of public services is large, there is complete stratification. Under mixed stratification, the increase in land supply in the suburbs causes low-income people to move to urban area, while lower commuting costs for suburban residents or increased public services in urban areas causes low-income people to migrate to urban areas. If travelling for public goods is impossible, these policies cause low-income residents to move from urban areas to suburbs.