The Modelling of Spatial Distribution of Residential Buildings and Offices in Moscow

We propose a general equilibrium model to study the spatial inequality of consumers and rms within a city. Our mechanics rely on Dixit and Stiglitz monopolistic competition framework [1]. The rms and consumers are continuously distributed across a two-dimensional space, there are iceberg-type costs (as in Krugman's models of trade[2]) both for goods shipping and workers commuting (hence rms have variable marginal costs based on their location, we borrow some of Melitz's ideas here [3]). Our main interest is in the equilibrium spatial distribution of wealth. We construct a model that is both tractable and general enough to stand the test of real city empirics. Our approach is somewhat similar to [4], however, we rely on a dierent framework, adjusting the ideas from the international trade models to the scale of a city. Our theoretical modeling process consists of two parts. First, we developed a one-dimensional model of the linear city on the [0, 1] interval. This model is an adaptation of the Dixit-Stiglitz- Krugman model of trade to the case of spatial distribution of rms and consumers within the city. Although it is far from reecting the real city structure, it is easier to solve and interpret the results. Second, we demonstrate how the unidimensional model can be upgraded to the empirics-friendly two-dimensional setup.