Economic Cycles and Urban Growth with Land Value and Land Rent

Abstract

The purpose of this study is to examine the existence of business fluctuations in an urban growth model of endogenous wealth and land value with residential distribution over a linear city by Zhang (2017). Zhang synthesised the Solow growth model and the Alonso model. This paper generalises Zhang’s model by allowing all the timeindependent parameters to be time-dependent. It examines the relationship between growth, urban structure and land value with different time-dependent exogenous shocks. We simulate the model to demonstrate the existence of equilibrium points, motion of the dynamic system, and oscillations due to different exogenous shocks. The paper makes a unique contribution to the literature of spatial economic growth by identifying cycles in a spatial growth model built on microeconomic foundation.