City economy

The city's economy began to develop in the 1826 Tyunen model , then in the theory of the central places of Walter Kristler in 1933, in the work of August Lösch in 1940. The first monocentric model of the city was presented in 1964 by the Alonso model ^[3] .

The Alonso monocentric model is being modernized over time: the monocentric center of the city weakens over time due to changes in technology, in particular, due to fast and cheap transport (which makes it possible for suburban residents to live away from their jobs center) and communications (which allow back offices to move out of the center). Polycentric expansion is associated with an increase in utility from a decrease in the average rent for land and an increase in the effect of agglomeration ^[4] .

The city's economy can be divided into six interconnected blocks of research ^[2] :

• market forces in urban development;
• land use within the city;
• urban transport ;
• urban issues and public policy ;
• housing and public policy;
• local government spending and taxes .

Market forces lead to the emergence of cities , determine the location of the city, its size and development. Thus, decisions on the territorial distribution of enterprises and households , when enterprises make choices based on maximizing profits, and households maximizing the convenience of living, lead to the emergence of centers of activity (cities), and their strength determines the size and economic structure of the city. Production clusters , such as Silicon Valley in California, create entire urban areas with dominant firms ^[2] .

Causes of concentration in the city ^[5] :

• Comparative advantages in interregional trade develop trading cities.
• The internal effects of the scale of production and saving transportation costs develop industrial cities.
• The agglomeration effect ( external effect ) leads to the concentration of enterprises and households that receive developed infrastructure and a high level of public goods.

The structure of land use depends on the intracity choice of the location of firms and households that associate this choice with the price of land, which is governed by land use rules: a decrease in land offers and building permits increase land and housing prices within these boundaries, and beyond its prices are falling. Local authorities carry out zoning of the city: a set of acceptable land use options for each land plot is recorded. Using the zoning tool for land plots, it is possible to control market forces that cause the spread of employment from the city center to the outskirts, affecting the structure of the urban economy ^[2] .

Urban transport affects land use, the relative accessibility of various sites. Road trips are affected by congestion, which is solved using ^[2] :

• introduction of a tax on congestion during peak hours, introducing a system of electronic vehicle identification;
• increased gas tax;
• increase parking fees;
• increase road capacity;
• public transport subsidies .

The local government , managing the urban economy , conducts economic policy at the city level and solves the problems of poverty and crime : they change the trend when the poor live with the poor, making them even poorer ^[2] .

When the household chooses housing , then this is the choice of location, but they also face problems of affordability of housing at a cost and low level of technical condition. The government provides subsidies to cover capital and operating costs, expenses for modernization, determining the categories of citizens entitled to receive these subsidies. The state is building a housing fund for certain categories of citizens, increasing or decreasing housing consumption, and ensuring lower housing prices ^[2] .

According to Charles Teague , households search for and analyze the level of public goods and group in relatively homogeneous areas of the city, or leave the city by voting with their feet . Municipal authorities, managing this process, and having two largest sources of municipal budget revenues - a property tax and intergovernmental transfers, adopt a budget that prefers the median voter, use Lindahl taxes (a tax equal to the marginal benefit from a local public good) ^{[ 2]} .

Due to the fact that the land supply remains unchanged, and the tax on real estate is the same in the country, the owners do not transfer them and housing prices do not change. In the case of an increase in property tax, prices for consumer goods increase, while households begin to pay more for housing and buy less other goods. The state allocates subsidies (conduct inter-budget transfers) to local authorities to solve external effects and problems of inconsistency, when social spending grows faster than tax revenues ^[2] .