Decentralization

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Urban Economy Theory #2 - Spatial pattern of employment
Although urban economists often assume that employment in urban areas is concentrated at the central business district (CBD), in actuality urban employment has been suburbanizing for a long time (White, 1999). Decentralized cities also have a wage gradient, which relates wages to distance from the CBD for identical jobs. Workers living at particular residential locations have a wage offer curve that indicates the minimum amount they must be paid to be willing to work at any job location. Households in the decentralized city will tend to segregate into different residential areas depending on their workers' job locations. For example, suppose that jobs are located only at the CBD and a ring sub center several miles from the CBD, while residences are located everywhere. We have shown that the decentralized urban area has a market wage gradient that relates wages to workplace location; in addition to having a market rent gradient that relates the price of land to residential location. The prediction that urban wages vary with distance from the CBD is one of the major testable hypotheses of the urban model (White, 1999).

The social optimality of firm decentralization is characterized by the level of decentralization that leads to maximum aggregate utility of all households. In the case of a monocentric city and a decentralized city in market equilibrium, the household utility does not vary with location; hence, the aggregate utility is simply the product of the common household utility and the number of household in the city:
Ue = N – Uo aggregate Where:
Ue : aggregate utility of a city in market equilibrium aggregate Uo : level of household util...

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