2.2.2. Income growth
Next consider the effect of increasing yþO for all workers
keeping population and road charges constant.
Proposition 2. Increasing income increases utility and rent in the
core and decreases core population. Hence suburban population is
increased and so is congestion.
Proof. In Section A.2 of the Appendix A. &
This result is also consistent with Wheaton’s, with the excep-
tion that in his case, the rent near the core always decreased. But
Wheaton did not include congestion.
How does this result change if we take into account the change
in public income induced by the population growth? Assuming a
zero road charge, rent revenue from the core increases and thus
total public revenue increases too, but what is not immediately
clear is whether public income per-capita, O, also increases. We
note from (5) with t¼0 that