Optimizing the number of employment subcenters to decentralize a congested city

We present a core-periphery-like multicentric urban spatial equilibrium model to explore the endogenous relationships among traffic congestion, urban population, and job decentralization, and investigate the urban optimization problem with fiscal considerations by optimizing the number of employment subcenters. The solution properties of this model, which is associated with the urban spatial structure, are analytically explored. We then compare four urban fiscal regimes to answer how the city authority should utilize fiscal instruments, such as aggregate differential rent, congestion toll, and revenue redistribution to support the construction of employment subcenters. Our results demonstrate the centralization effect of congestion toll and the decentralization effect of revenue redistribution. Revenue redistribution induces an increasing population in the suburban area, as well as a larger number of employment subcenters. Furthermore, we find that achieving the city authority's fiscal balance may not necessarily enhance the residents' utility level when congestion pricing is not implemented, depending on the unit construction cost of employment subcenters. Nevertheless, it can always improve utility for the residents when the marginal-cost congestion pricing scheme is utilized to eliminate the externality on highways. In addition, the regimes with the city authority's fiscal balance may not necessarily lead to the maximal social welfare, depending on the parameter converting residents' utility level into equivalent monetary units. We also discuss the urban optimization problem by considering a utility improving constraint and the agglomeration from production in the core, and the presence of the optimal urban population.