Towards a theory of intra-urban wage differentials and their influence on travel patterns

The following are three recent works that should be consulted by readers with an interest in the price of space and its relationship to an equilibrium distribution of population and economic activity in an urban area. W. Alonso,A Model of the Urban Land Market: Locations and Densities of Dwelling and Businesses, Ph. D. Thesis, Department of Regional Science, University of Pennsylvania, 1960. R. Muth, “Economic Change and Rural-Urban Land Conversion,”Econometrica, XXIX, No. 1, (January 1961), 1–23. L. Wingo,Transportation and Urban Land, (Washington, D.C.: Resources for the Future, 1961).

In point of fact, interest rates do tend to vary systematically within many cities. There are significant restrictions on entry into banking in most states and prohibitions against branch banking in many of them. As a result banking tends to be more competitive in central cities—particularly their downtown areas—then in suburban satellites. Downtown banks probably pay higher interest rates on savings accounts and charge lower rates, on average, for commercial and industrial loans than suburban banks. The reader may object to the above conclusion on the ground that suburban firms would borrow lesslocally if higher rates were charged, and that their efforts to obtain outside financing would bring about an equalization of rates. There are forces tending to bring about equalization, but they are probably insufficient to eliminate differentials, particularly on loans to small firms. If suburban banks do in fact tend to charge a higher average interest rate on loans than downtown banks, it is probably due to less competitive banking, and the fact that small suburban firms are less likely to obtain a loan outside their home community without paying a premium.

the analysis becomes much more involved if the plant draws sufficient labor to effect congestion and, therefore, the structure of transport costs in the two directions.

A transport mode that generates heat which it dissipates inadequately, and whose fuel input per mile rises as temperature rises would appear to have the above cost characteristics.