Time and space matter: How urban transitions create inequality

To analyze the response of cities to urban policies or transportation shocks, describing a succession of stationary states is not enough, and urban dynamics should be taken into account. To do so, the urban economics model NEDUM is proposed. This model reproduces the evolution of a monocentric city in continous time and captures the interaction between household moves, changes in at sizes, rent levels, and density of housing service supply. NEDUM allows, therefore, for a temporal and spatialized analysis of urban transitions. Applied to climate policies, this model suggests that the implementation of a transportation tax causes a larger welfare loss than can be inferred from traditional models. Moreover, such a tax increases signi cantly inequalities if its implementation is not anticipated enough. According to these results, therefore, smooth and early implementation paths of climate policies should be favored over delayed and aggressive action.