In the ideal hypothetical situation of transport and urban systems, people live in close proximity to their employment. Actually, this situation cannot be easily achieved, particularly in big cities where the majority of jobs are concentrated in the central area. In such cases, competition for space close to the workplace causes a rise in housing and land prices. As a direct result, residential densities decline from the centre. A similar analysis can be applied to the location of firms, since the wages paid to their employees working downtown are usually high and varies according to the size of the city and the location of jobs in relation to the centre area. Some other diseconornies are higher land prices, congestion and pollution.


This, in turn, leads to increases in costs for the firms and for their employees, despite the external economies that come from the central location, eg. transference of information from firm to firm, and the agglomeration effect which consists of the advantage of the increase in the size of the market for supply firms that may then provide goods and services more cheaply. This chapter aims to provide the basic theoretical background in urban economy that ‘is necessary for both identification of the relevant elements relating location and transport issues, and the definition of the methodology to be used in this thesis. The question of population and work places distributions as well as the interaction between urban structure and transport systems are initially presented. Then, the basic theory of residential and job search and the importance of accessibility in the analysis of travel demand are highlighted.


Traditionally, cities have originated from a nucleus of co-existing jobs and residences. The urban structure has continuously changed, and along this process, population has experienced a long term decentralisation, followed by employment redistribution. Three basic economic structures may be identified for the cities. Initially, they were primarily trading centres, then became manufacturing centres and now are urban centres of administration. Most of the establishments in the later stage comprise of banks, insurance, finance, and marketing companies, which benefit from external economies due to their central location. However, improvements in telecommunications has allowed both the decentralisation of goods handling and centralisation of dealing, and most of the routine activities do not necessarily have to be located in the central area. Also increased car ownership make the workforce more flexible in terms of job location.


In spite of these facilities, which favour job decentralisation, the cities are still very attractive. This is the typical case of London, which has presented growth in commuting over the last decade. Changes in the urban economy, and consequently on the patterns of work travel, have contributed to such a phenomenon. Indeed, as a consequence of the shift of job categories in the city, its catchment area has changed for specialised labour. If only the costs of travel and housing were considered, the optimal location choice would be one where the household was able to minimise its total expenditure on housing and location, ie. the household would chose a location away from the centre where the saving in housing costs were greater than or equal to the increase in travel costs to that location. But the location choices of individuals do not usually follow the trade-off between the housing costs which can be saved and the extra travel costs


which are incurred.


The characteristics of the town and its population are some of the elements responsible for the pattern of location. Evans (1985) argued that the trade off theory is useful in explaining the pattern of location in very large cities with a dominant city centre, where travel costs are high and journey times to the destinations are long. However, if the differences in housing costs and travel costs are small (as they will be in small towns), then factors such as the past pattern of development and the ownership of land, environmental attributes, the social preferences of the population, and local government services will help to explain the general pattern of location. According to the author, the limited applicability of the trade-off theory is due to the restrictive assumptions on which it is based, such as single central business district to which all workers commute, uniform travel costs, no topographical features, costless adaption of housing, and no externalities. Residential density, social agglomeration, and local government services are some of the factors which influence people in their choice of residential location.


Householders are sensitive to variations in residential density, and in particular the higher-income group willing to pay more for a better residential area. Individuals also prefer to interact with others who are socially similar to themselves. In other words, people of the same class tend to live closer to each other, thus creating sectors differentiated by household income/social class. There is also some responsiveness to locations according to the quality of the public goods and taxes levied by the local government. Some other factors which drive households to different location choices are level of education, life-cycle changes, historical mobility behaviour, income and changes in the level of jobs provided. The level of education can be related to mobility in a sense that educated people are better informed about cultural and economic opportunities. High incomes may imply a higher demand for space radiating out from the city centre. On the other hand, high income may also increase the time cost of commuting, leading to a need for locations closer to inner areas. But there is also a question of life-cycle, as younger and single people tend to live in high-priced houses near the city centre whilst families usually choose places further away. The combination of all these factors are likely to be important in this study.


In the U. K., there is a tendency, which is almost generalised, of richer people living further away from the centre than the poor. This is a characteristic of households with high income elasticities of demand for space. For those wealthy people with low income elasticities, the districts in the inner areas are preferred. The relative location of different income groups depend not only on the income elasticity of demand for space, but also on the cost and speed of transport, and other geographic and socio-economic factors. To a certain extent, the decisions made to locate roads, railways, ports and airports have had an influence on people’s life pattern and mode of transport. The transport systems shape the distribution of activities and interfere in the proportions that each zone contributes to the total traffic. Transport investments like a general increase in the comfort of travelling, might increase people’s willingness to travel further, and changes in transport cost and time might affect the pattern of location of households relative to each other as well as in relation to the centre. An increase in the speed of travel, which reduces journey times, has a much bigger effect on the reduction of travel cost of the high income people than on the costs of the lower income group.


This is due to the higher value of travel time of wealthy people in relation to the other classes. Consequently, increases in travel speed favours the decent ral isati on of high-income groups. On the contrary, a direct decrease in the transport costs causes a reduction of travel costs for the lower income groups that is more proportional than the amount perceived by the higher income groups. Therefore, it may lead to an outward movement of low-income households relative to high-income households. Based on the previous argument, Evans (1985) concluded that a slow, cheap and uncomfortable transport system would result in a compact city with wealthy classes living close to the centre. On the other hand, the opposite effect would be seen with a fast, expensive, and comfortable transport system. A brief recapitulation of the urban centres economy shows the effects of transport investment on the location of economic activities. In the nineteenth century, the short distance transport of goods using horses and carts was very inefficient as regarding cost and time.


Therefore, the industries were usually located close to each other, and particularly in ports where the raw material could be easily accessed. Moreover, they tended to be concentrated in the city where the distribution was facilitated. However, the growth of cheaper, faster road haulage, and the reduction in transport cost since then have allowed the decentralisation of manufacturing from the large cities. In spite of the external economies obtained with the agglomeration of industries, the costs of concentration (eg. high land costs, high labour costs, congestion and pollution), have favoured the dispersal of the production sectors of the economy from the metropolis. But in addition to decentralisation, the manufacturing industry has also been affected by a national economic crisis which has caused a drastic reduction in this sector. The chapter now turns to a more specific issue that is the linking element between the city activities and the transport system. A basic concept of accessibility and some evidence of its relevance in determining the uses of the land are discussed in the following section.