Heterogeneous households and firms in an urban model with open space and agglomeration economies*

This paper develops a model with heterogeneous households and firms that can locate anywhere in the city. The main features of the model are household preferences for open space which depend on distance to the greenbelts at the city periphery, and agglomeration economies for firms. Numerical results show equilibrium location patterns, rents, and wages under different model specifications. Under most conditions, monocentric location patterns (where there is a higher concentration of firms in the centre zones compared to surrounding zones) are observed, but duocentric location patterns for firms can emerge if both open space values and travel costs are high.