Land use and density in cities with congestion

It was well documented that monocentric spatial models with congestion require driving tolls to generate market efficiency. Because driving and location are equivalent, tolling congestion is the same as regulating density. This paper shows that internalizing the congestion externality always requires upward adjustments to market density-which are greatest at the urban center. This holds whether,or not transportation capacity is optimally provided. Simulations suggest optimal cities should have central densities that are orders of magnitude greater than market cities. (C) 1998 Academic Press.