Location Choice and Land Use in an Isolated State: Endogenous Capital and Knowledge Accumulation.

The purpose of this study is to develop an urban model describing an economic dynamics of three parts--the CBD, the residential area and the agricultural area--in an isolated urban system. The system consists of three--agricultural, industrial, and service--sectors. The model describes dynamic interactions among capital and knowledge accumulation with endogenous urban structure. The model may be considered, in a broad sense, as a synthesis of new urban economics (Alonso's model), urban economic growth theory with endogenous knowledge and Thunen's economic system. We show that the urban dynamics may have either a unique or multiple equilibria and may be either stable or unstable, depending upon creativity of various economic activities. We also examine effects of changes in some parameters upon the long-run urban structure.