Growth, Residential Distribution, and Land Price in an Integrated Solow’s Growth and Alonso’s Residential Model

Abstract

This study builds a spatial growth model with residential distribution. The model is a synthesis of the Solow growth and Alonso residential models with endogenous land value. A unique feature of the study is that it deals with dynamic interactions between land value, land rent, wealth accumulation, amenity change, and residential location. It models the economic production and growth mechanism on the basis of the Solow growth model and the residential distribution on the basis of the Alonso model. The determination of the land value is based on Zhang’s recent work on economic growth with endogenous land value. We simulate the motion of the economy over time and space. We carry out comparative dynamic analysis with regard to the rate of interest, the total productivity, and the propensity to save.