Regional and Urban Economics Parts 1 & 2

Externalities in Space

YOSHITSUGU KANEMOTO¹

University of Tsukuba, Ibaraki, Japan

1.  INTRODUCTION

Cities are usually defined as densely populated geographic areas and a concentration of many people in a small area causes many types of externalities such as traffic congestion, racial discrimination, pollution, noises, and neighborhood amenities. This chapter surveys recent developments in the economic analysis of urban externalities. Since space plays a key role in urban living, our attention is focused on the spatial aspect of urban externalities.

“Externalities” arise when one economic agent does not compensate others for his actions which may directly affect their consumption or production possibilities. Smokers who do not, for example, pay ...