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α: calibrated so average coauthorship-adjusted count equals average raw count
We provide a full characterisation of the socially optimal allocation of urban land to households and firms in a long narrow city with centrally located amenities. Households support linear costs of commuting to their workplace, and of visiting the centre. Firms operate under monopolistic competition, having a marginal production cost that increases exponentially with distance to the centre. We compare the socially optimal urban land use with that which emerges from market forces, and propose policy interventions to achieve city-wide welfare gains. Travel subsidies to households in proportion to firms’ price-cost margin are sufficient for the socially optimal allocation of urban land to emerge as the market equilibrium.