Category Archives: Urban Economics

“High Speed Rail: Lessons for Policy Makers from Experiences Abroad,” D. Albalate & G. Bel (2010)

The US is considering the construction of high speed rail corridors similar to those in place in France, Germany, Japan, Italy and, most recently, China, whose fastest current route (Guangzhou-Wuhan) covers 700 miles in about 3 hours. What can we learn? First, only France runs a profitable (in the sense of social welfare) system at present, the economic impacts of HSR are fairly limited (though difficult to measure), the environmental impact of HSR is limited (it produced similar CO2 to cars), and HSR optimally connects regions at distances between 100 to 500 miles that will see over 8 million trips per year. Also, cities with poor internal public transit, or whose rail stations are outside the city center, see less benefit from HSR. Given that around 1/3 to 1/2 of air travel is replaced by HSR after it is introduced (as well as limited amounts of car travel), California and Washington DC to Boston via NY would seem to be viable candidates for profitable high speed rail.

“How Transport Costs Shape the Spatial Pattern of Economic Activity,” J-F. Thisse (2009)

A brief review of the literature on how changes in transport costs can change the spatial makeup of economies. Consider a world with positive transport costs between regions, and constant returns to scale technology: there is no reason for trade, since transport is costly, and everything can be produced at the same cost in each region. Therefore, each household will be an autarky. To generate cities and trade, then, we need some sort of increasing returns to scale in production, whether than be directly in the factor, through some aggregation of knowledge, or whatever. Given that premise, nonobvious results are widespread in this theory. For instance, imagine a poor and a rich country decrease the transport costs between the two (i.e., the EU builds a railroad from Germany to Poland). In a spatial model, this will generally lead to more aggregation of high-value production in the wealthier country, due to greater efficiency in the high-value sector resulting from increasing returns to scale.

Clearly, production is not the only reason cities exist – Glaeser, among others, has pointed out that consumption externalities, like access to opera, exist as well – but nonetheless understanding the economics of cities in a world of declining transport and communication prices is critical for current urban policy.

“Causes of Sprawl: A Portrait from Space,” M. Burchfield et al (2006)

Using 30 meter by 30 meter satellite and high altitude photography from 1976 and 1992, the authors study the nature of sprawl in the United States by exactly noting what parts of the US are built up or paved. They note that only 1.9% of the continental US is built up or paved, that even within urban areas there is enormous amounts of open space, and that, by one definition, the percent of built up land around a given house in an urban area has not increased from 1976 to 1992, since the new housing built on the urban fringe is evenly weighed when infill development increases the density of existing houses in already built up areas. The authors regress a number of explanatory variables on their density measure, and find that, among other things, geography (the presence of mountains, the ruggedness of the terrain, and the existence of aquifers suitable for wells) cannot be ignored. There is also a citation-rich summary of the extant models of monocentric and polycentric cities.

(As an aside, some claims in this paper should, as the authors note, be taken with a grain of salt; this gives me a good excuse to link to a 2007 paper of my own on density in the US. The “Sprawl from Space” paper suggests that sprawl has not increased from 1976 to 1992, and second, that counter-intuitively, western cities like SF and Phoenix are not particularly sprawling. Our paper, on the contrary, showed declining population density over each decade, over any measure of a city (municipal, urban area, MSA, etc.) you want, and further pointed out that a quirk in the definition of “metropolitan area” means that MSAs are totally unsuitable for work on density. Some rectification on the population density claim results from the fact that sprawl appears to have been much quicker in the 50s-70s than during the 80s.)

“Geographic Determinants of Housing Supply,” A. Saiz (2010)

Cities are not built on flat, developable circles, but are rather constrained by geography: steep slopes, oceans and wetlands do not permit new housing. Saiz develops a new database of geographically-constrained land within 50 miles of US metro area centers, and shows that increased geographical constraints both increase housing prices and increase the housing supply price elasticity. This effect is not simply a coastal effect: it is evident even within the subset of coastal cities. An immediate question, then, is why anybody lives in constrained locations. In a clever model, Saiz shows that geographically constrained cities which we witness in the data are seen to exist ex-post because of favorable productivity and amenity shocks in the past. The model suggests that, in order to still exist as a city, geographically constrained locations must show higher productivity and higher amenities, and further that there should be no correlation between population and geographical constraint. All three of these are evident in the data. Further, Saiz confirms the “homevoter hypothesis”, whereby stricter land use regulations are endogenous to higher home prices – in this way, restrictive geography increases home prices directly by constraining supply, and indirectly by increasing land use regulation.

“Sprawl and Blight”, J. Brueckner and R. Helsley (2009)

It is well known that much of the attractiveness of the suburbs is the result of unpriced externalities (for instance, the “open space” amenity, unpriced government infrastructure, congestion, etc.). Brueckner and Helsley point out that precisely the same externalities can explain urban blight, or the prevalence of suboptimal reinvestment in urban housing when a city grows.

“Does Local Business Ownership Insulate Cities from Economic Shocks?,” Kolko and Neumark, 2009

It is often claimed that cities and towns should emphasize locally-owned businesses because, in the event of an industry or regional downturn, these types of businesses are less likely to lay off workers. Kolko and Neumark use data from the National Establishment Time Series and find that this effect depends on what type of locally-owned business is being considered. Conditioning on region and industry, locally-owned chains and company headquarters showed very little employment volatility in the wake of a downturn, but single-establishment businesses – what might be considered the heart of “locally-owned business” – showed amplified effects on employment during a downturn. This suggests that if the rationale for locally-owned business is to help a region weather a poor economy, development efforts should be concentrated on company headquarters and small chains rather than on single-establishment businesses. (Link to WP, final version in November 2009 JUE)

“Economic Geography and Color Maps,” Nordhaus and Chen, 2009

Nordhaus and Chen introduce a new database of economic output mapped to a grid of 1 degree latitude by 1 degree longitude across the planet. Though the paper itself includes very little new theory, the nature of the database – available for years 1990, 1995, and 2000 – shows promise in answering questions concerning, for instance, the spread of economic production over space, or the much heavier concentration of economic activity along coasts in the third world than in the first world.

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