The formulation anticipates that the per-head subsidy for the
production externality should now be paid only to those creating
this externality, hence those who work in the core. However,
there is no loss of generality, since the road charge paid to
suburban workers can be net of a per-head subsidy if it were
optimal that a subsidy be paid to the suburban workers as well.
Again, skipping over the derivations (available from the author),
we can show that t 1 ¼ n 21 t 1
0
and t 2 ¼ n 22 t 2
0
. The revenues from
the corresponding tolls completely cover the costs of the bridges
and the suburban roads. Then, the ADLR from the core pays for
the fixed cost of the core’s public transit investment as well as the
subsidies to those working in the core. Thus, the rent surplus
again covers the full social cost of all activities exhibiting
increasing returns (Henry George Theorem):