An urban general equilibrium model with multiple household structures and travel mode choice

Households in real cities are heterogeneous regarding their size and composition. An aspect usually neglected in urban models used to study economic and policy issues that arise in today's cities. We develop an urban general equilibrium model that takes a more complex household structure explicitly into account. The model is based on the single consumer type model of Anas and Xu (1999) or Anas and Rhee (2006) and treats the interactions of urban product, labor and land markets as well as linkages between city firms and different consumer types living in different household structures. Households differ not only in endowments, preferences and their valuation in regard to different travel modes, but also in size and the composition regarding their members. The implementation of a more complex household structure then allows studying a broad range of further urban economic issues, which treat different household structures differentlyurban economics; general equilibrium; household structure; location choice

Income tax deduction of commuting expenses and tax funding in an urban CGE study: the case of German cities

Germany like many other European countries subsidize commuting by granting the right to deduct commuting expenses from the income tax base. This regulation has often been changed and has regularly been under debate during the last decades. The pros (e.g. causing efficiency gains with respect to the spatial allocation of labor) and cons (e.g. causing urban sprawl) are well documented. Nonetheless, there is need for further research. For reasons of tractability the few models applied in the tax deduction related literature are based on restrictive assumptions particularly concerning the design of the income taxation scheme and the structure of households (neglecting household heterogeneity) and, most importantly, they do not integrate labor supply and location decision problems simultaneously. Here, for the first time, those and more features are taken into account in a full spatial general equilibrium simulation approach calibrated to an average German city. This model is applied to calculate the impacts of tax deductions on an urban economy thereby considering different funding schemes. Our results suggest that the tax deduction level currently chosen is below the optimal level in the case of income tax funding. If a change in the tax base occurs, e.g. toward consumption tax or energy tax funding, the optimal size of the subsidy should be even higher. Furthermore, the different policy packages cause a very differentiated pattern regarding welfare distribution, environmental (COâ‚‚ emissions) and congestion effects. We also find surprisingly small effects on urban sprawl characterized by suburbanization of residences and jobs and increasing commuting distances.

An urban general equilibrium model with multiple household structures and travel mode choice

Households in real cities are heterogeneous regarding their size and composition. An aspect usually neglected in urban models used to study economic and policy issues that arise in today's cities. We develop an urban general equilibrium model that takes a more complex household structure explicitly into account. The model is based on the single consumer type model of Anas and Xu (1999) or Anas and Rhee (2006) and treats the interactions of urban product, labor and land markets as well as linkages between city firms and different consumer types living in different household structures. Households differ not only in endowments, preferences and their valuation in regard to different travel modes, but also in size and the composition regarding their members. The implementation of a more complex household structure then allows studying a broad range of further urban economic issues, which treat different household structures differently. --Urban Economics,General Equilibrium,Household structure,Location choice

Income tax deduction of commuting expenses and tax funding in an urban CGE study: the case of German cities

Germany like many other European countries subsidize commuting by granting the right to deduct commuting expenses from the income tax base. This regulation has often been changed and has regularly been under debate during the last decades. The pros (e.g. causing efficiency gains with respect to the spatial allocation of labor) and cons (e.g. causing urban sprawl) are well documented. Nonetheless, there is need for further research. For reasons of tractability the few models applied in the tax deduction related literature are based on restrictive assumptions particularly concerning the design of the income taxation scheme and the structure of households (neglecting household heterogeneity) and, most importantly, they do not integrate labor supply and location decision problems simultaneously. Here, for the first time, those and more features are taken into account in a full spatial general equilibrium simulation approach calibrated to an average German city. This model is applied to calculate the impacts of tax deductions on an urban economy thereby considering different funding schemes. Our results suggest that the tax deduction level currently chosen is below the optimal level in the case of income tax funding. If a change in the tax base occurs, e.g. toward consumption tax or energy tax funding, the optimal size of the subsidy should be even higher. Furthermore, the different policy packages cause a very differentiated pattern regarding welfare distribution, environmental (CO2 emissions) and congestion effects. We also find surprisingly small effects on urban sprawl characterized by suburbanization of residences and jobs, increasing commuting distances and spatial city growth. --urban general equilibrium model,commuting subsidies,income tax deduction

How does the household structure shape the urban economy?

Households in real cities are heterogeneous regarding their size and composition. This implies that the household structure -i.e. the (average) household size, the composition, the relative share of different household types, and the number of households - differs across cities. This aspect is usually neglected in urban models used to study economic and policy issues that arise in today's cities. Furthermore, the household structure might change over time. For instance, over the last decades average household size has decreased in many countries. Several implications of this change have been discussed, but usually not in regard to an urban economy with its interdependencies. We develop an applied urban general equilibrium model which explicitly takes the household structure into account and thus allows studying the impacts of changes in the household structure on an urban economy and its spatial pattern. The paper shows that changes in the household structure affect an urban economy in various ways and may contribute to explain economic and spatial effects on cities. Compared to a 'Base City' which reflects the actual household structure in the United States, urban labor force participation, housing demand, rents, wages as well as urban commuting and shopping patterns are considerably affected by, e.g., changes in the average household size in a city. For instance, wage inequality between differently skilled workers rises and extreme cross commuting drops to almost zero when the city turns into a pure 'Singles City'. --General equilibrium,Household structure,Household size,Location,Commuting

An urban general equilibrium model with multiple household structures and travel mode choice

Households in real cities are heterogeneous regarding their size and composition. An aspect usually neglected in urban models used to study economic and policy issues that arise in today's cities. We develop an urban general equilibrium model that takes a more complex household structure explicitly into account. The model is based on the single consumer type model of Anas and Xu (1999) or Anas and Rhee (2006) and treats the interactions of urban product, labor and land markets as well as linkages between city firms and different consumer types living in different household structures. Households differ not only in endowments, preferences and their valuation in regard to different travel modes, but also in size and the composition regarding their members. The implementation of a more complex household structure then allows studying a broad range of further urban economic issues, which treat different household structures differentl

An urban general equilibrium model with multiple household structures and travel mode choice

Households in real cities are heterogeneous regarding their size and composition. An aspect usually neglected in urban models used to study economic and policy issues that arise in today's cities. We develop an urban general equilibrium model that takes a more complex household structure explicitly into account. The model is based on the single consumer type model of Anas and Xu (1999) or Anas and Rhee (2006) and treats the interactions of urban product, labor and land markets as well as linkages between city firms and different consumer types living in different household structures. Households differ not only in endowments, preferences and their valuation in regard to different travel modes, but also in size and the composition regarding their members. The implementation of a more complex household structure then allows studying a broad range of further urban economic issues, which treat different household structures differentl

Does labor supply modeling affect findings of transport policy analyses?

The transport and urban economics literature applies different labor supply approaches when studying economic or planning instruments. Some studies assume that working hours are endogenous while the number of workdays is given, whereas others model only decisions on workdays. Unfortunately, empirical evidence does hardly exist on account of missing data. Against this background, we provide an assessment of whether general effects of transport policies are robust against the modeling of leisure demand and labor supply. We introduce different labor supply approaches into a spatial general equilibrium model and discuss how they affect the welfare implication of congestion policies. We, then, perform simulations and find that in many cases the choice of labor supply modeling not only affects the magnitude of the policy impact but also its direction. While planning instruments are suggested to be quite robust to different labor supply approaches, the way of modeling labor supply may crucially affect the overall welfare implications of economic instruments such as congestion tolls. Based on these findings it becomes clear which labor supply approach is the most appropriate given specific conditions. Our study also emphasizes the need for better micro labor market data that also feature days of sickness, overtime work used to reduce workdays, the actual number of leave days, part-time work, days with telecommuting etc

Climate Change, Agriculture, and Economic Development in Ethiopia

Quantifying the economic effects of climate change is a crucial step for planning adaptation in developing countries. This study assesses the economy-wide and regional effects of climate change-induced productivity and labor supply shocks in Ethiopian agriculture. We pursue a structural approach that blends biophysical and economic models. We consider different crop yield projections and add a regionalization to the country-wide CGE results. The study shows, in the worst case scenario, the effects on country-wide GDP may add up to −8%. The effects on regional value-added GDP are uneven and range from −10% to +2.5%. However, plausible cost-free exogenous structural change scenarios in labor skills and marketing margins may offset about 20–30% of these general equilibrium effects. As such, the ongoing structural transformation in the country may underpin the resilience of the economy to climate change. This can be regarded as a co-benefit of structural change in the country. Nevertheless, given the role of the sector in the current economic structure and the potency of the projected biophysical impacts, adaptation in agriculture is imperative. Otherwise, climate change may make rural livelihoods unpredictable and strain the country’s economic progress.Peer Reviewe

The economics of workplace charging

To overcome the range-anxiety problem and further shortcomings associated with electric vehicles, workplace charging (WPC) is gaining increasing attention. We propose a microeconomic model of WPC and use the approach to shed light on the incentives and barriers employees and employers face when deciding on demand for and supply of WPC. It is shown that under market conditions there is no WPC contract an employer is willing to offer and at the same time the majority of employees is willing to accept. To overcome the lack of demand or underprovision of WPC we discuss various ‘remedies’, involving subsidies to charging facility costs and adjustments in electricity tariffs or loading technologies. We find that direct subsidies to WPC facilities or subsidies combined with specific energy price policies could be a way to foster WPC provision. In contrast measures on the employee side that may help to stimulate the demand for WPC turn out to be less feasible. Hence, our results suggest that in order to promote WPC it is more promising to support employers in offering WPC contracts than to provide employees an incentive to accept WPC contracts. The study therefore gives a rationale for public initiatives being undertaken to boost WPC provision, as e.g. in the case of the US