Skip to main content
SLU publication database (SLUpub)

Research article2021Peer reviewedOpen access

On the design of sustainable cities: Local traffic pollution and urban structure

Kyriakopoulou, Efthymia; Picard, Pierre M.


This paper investigates the impact of local traffic pollution on the formation of residential and business districts. While firms benefit from local production externalities, households commute to their workplaces with private vehicles and exert a local pollution externality on the residents living along the urban transport networks. The spatial location of firms and residents endogenously results from the trade-off between the production and pollution externalities and the commuting costs. The analysis shows that in monocentric cities the benefits associated with a fall in per-vehicle pollution are absorbed by rents paid to absentee landlords. When a city includes business and residential districts as well as a district mixing both agents, a lower per-vehicle pollution enlarges the residential districts and shifts the business districts closer to the geographical center of the city. The paper finally studies the optimal city structure. The first-best policies that fully internalize the externalities still foster business agglomeration.


Local pollution; Urban structure; Commuting

Published in

Journal of Environmental Economics and Management
2021, Volume: 107, article number: 102443

    Sustainable Development Goals

    SDG11 Sustainable cities and communities

    UKÄ Subject classification

    Economic Geography

    Publication identifier


    Permanent link to this page (URI)