Spatial Structure of Wages and Rents

Urban economic literature usually focuses on Central Business District model, which explains rental gradient around city center and is based on assumption that agents are dispersed in space, but all work in one point. The basic idea of the present model is that jobs exist in all point of continuous space, but high wages are offered only in some set of points. It can be either due to superior technology (hi-tech center) or difference in tax laws (Monaco) or just wage differential between rural and urban area. Since housing supply is inelastic in the short run, the immediate response to such situation is travelling to work where wages are higher from the location where housing is cheaper. A short-run equilibrium presents such wage distribution and rental price for housing that nobody can make spatial arbitrage. The long run dynamics includes both investment is housing as well as labor migration. Industrialization first has pushed migration to cities, the places of superior technology, but later some people returned to the city neigbourhoods, which were offering cheaper housing and possibility to travel to work to city. This pattern of migration is named periurbanization and was typical for Spanish internal mobility in 1980-ies. The integration of EU countries, integration of Hong Kong into China as well opening of other borders create similar movement in housing rents as well as patterns of short-distance labor mobility. The paper focuses more on theoretical aspects of the problem.