Migration costs, commuting costs and intercity population sorting
We study the effects of reducing intercity commuting time on urbanization process -- from Suburb to Metropolis -- that is driven by a technological advantage held by the Metropolis. In each period, a new generation of workers that are heterogeneous with respect to ability is born. Workers can migrate and commute to work between the cities at given migration cost, commuting costs, and commuting time. In equilibrium migration is unidirectional, where the migrants are the most able workers of the Suburb. Suburb workers with moderate ability commute to work in the Metropolis and the least able work in the Suburb. We show that reducing commuting time can moderate, stop, or reverse the migration process. In the latter case the economy switches from a growing to a declining path of aggregate and per-capita output. Yet, for low commuting cost, reducing commuting time always increases long-term total production. Nevertheless, workers who reside and work in the Suburb suffer from commuting-time reduction due to increase in the Suburb's housing price, while all other workers in the economy gain.
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