2.2.1. Population growth
What effect will an increase in the total population of the city
have on the equilibrium? We answer initially by assuming that O
and t are constant, that is the population increase does not
change the public income of a resident, equivalent to assuming
that the per resident public income is kept constant by higher
level government transfers. The answer is obtained by total
differentiation of (1)–(3) with respect to the endogenous vari-
ables u,n 1 ,R 1 f g and the exogenous variable n.
Proposition 1. A higher population of workers causes the core rent
to rise and the utility level to fall while both core and suburban
residents and congestion increase.
Proof. In Section A.1 of the Appendix A. &
Does aggregate suburban land also increase with population?
To see, we differentiate and after some algebra and using the
results in the Appendix A we get:
dH 2
dn
¼
dn 2
dn
h 2 þn 2 h 2u
du
dn
:
The first term is positive and measures the direct effect
on suburban land of the increase in the suburban population.
The second term is negative measuring the reduction in lot
size induced by the lower utility under the larger population
(Proposition 1). Lot size demand increases with u since housing is
a normal good. dH 2 /dn is then always positive as long as the
income effect is not strong enough, that is the drop in utility from
adding more population, does not reduce lot size in the suburbs a
great deal.