Heterogeneous radial commuting bottlenecks with agglomeration economies: Methods and calibration for Bogotá

This model combines heterogeneous commuting bottlenecks on radial corridors in a monocentric city with agglomeration economies. Demand and the available bottleneck capacity differ between the corridors and commuting costs vary according to an OD-specific Vickrey congestion technology. Even though the bottlenecks are heterogeneous and isolated, the commuting markets are interlinked because the activity value at the trip end is determined by the impact of city-wide urbanisation economies on wages. This spatial setup sheds light on a novel aspect of offsetting congestion and agglomeration externalities and allows simulating the geographic disparities and conflicting interests common in many cities, without a significant increase in complexity. The set of equations resulting from this setup have only numerical solutions and are calibrated in an illustrative example using data for Bogotá, Colombia. Spatial heterogeneity allows observing how city-wide agglomeration benefits and local congestion costs interact to reveal zonal preferences for toll setting and the efficiency gains from aggregate welfare maximisation. We identify a trade-off between policy objectives of welfare and access to jobs, frictions between local and city-wide interests, and that the pricing policy on one corridor affects all others. Due to (positive) agglomeration externalities, the optimal time-dependent toll turns into a commuting subsidy in peak shoulders.