Telecommuting, traffic congestion, and agglomeration: a general equilibrium model

Abstract We develop a fully closed general equilibrium model of a monocentric city in which land is allocated to production, housing, and roads. CBD workers and telecommuters are imperfectly substitutable in production. CBD workers contribute to the CBD's agglomeration economies but cause traffic congestion in commuting. Telecommuters do not cause congestion and do not contribute to agglomeration. The effects of telecommuting on the urban economy and land use pattern are studied. The first-best optimal policy in the presence of agglomeration economies, congestion, and telecommuting is derived and its impacts are compared with the effects of different second-best policies.

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