Are Cities Dying?

This Are Cities Dying?

Based on E.L. Glaeser, Journal of Economic Perspectives 12(2): 139-160.

Or This

Confusion About the Term City

• The City as a Municipality or Local Authority Area: The term city might be simply the historical core municipality (local authority area), such as the city of Chicago or the ville de Paris • The City as a Metropolitan Area: sometimes used to describe an entire labor market, which includes the historical core municipality, continuously developed suburbs and exurbs, which are not connected by continuous development to the urban area or agglomeration • The City as an Urban Area: sometimes used to describe an urban area, which is an area of continuous urban development (or an agglomeration or urban footprint).

1 Terms - Defined

• City: generally means a municipality, which would typically have locally elected administration, such as a city council and a mayor. • Central City: or core city is the municipality in an urban area or metropolitan area that emerged historically as the most prominent in the urban area. • The Urban Core: or the inner city is in the central city. • Suburb: are all of the continuous urbanization that extends beyond the core city (all of the urban area except the historical core municipality and other adjacent historical municipalities). • Urban Area: – area of continuous urban development.

Example Houston

2 U.S. 2012 Notice the Bakken and Eagle Ford Oil Fields – did not show up in 2010 Picture

Eagle Ford

Exurban Terms

• Exurban: Exurban refers to non-rural development that is within a metropolitan area, but outside the urban area. – Exurb: a municipality (or a community) or urban area in a metropolitan area that is separated by rural territory from the principal urban area. – Low Density Exurban Development: generally large lot residential development that is not of sufficient density to be considered urban and is not agricultural

Exurban Growth

3 Exurban Growth 2000-2010

http://www.theatlanticcities.com/neighborhoods/2012/07/exurbs-fastest-growing-areas-us/2636/

http://demographia.com/db-define.pdf

http://www.newgeography.com/content/002346-the-evolving-urban-form-chicago

4 Metropolitan Terms

• Metropolitan Area: means a labor market, or the area from which the urban area draws its employees.

• U.S. Census Definitions – Metropolitan areas – contains a core urban area of > 50,000 people – Micropolitan area – area has a core population of >10,000 but less than 50,000 – Urban • > 2,500 people and incorporated • Designed census area • Part of an urban area – Rural

Little to negative increase in urban %

Approximately equal Redefined urban U.S. Census Data

5 http://www.census.gov/history/www/ programs/geography/urban_and_rural _areas.html

http://www.newgeography.com/content/004153-moving-south-and-west-metropolitan-america-2042

https://www.census.gov/geo/maps-data/maps/pdfs/thematic/2010ua/UA2010_UA_Pop_Map.pdf

6 https://www.census.gov/geo/maps-data/maps/pdfs/thematic/2010ua/UA2010_UA_Pop_Map.pdf

https://www.census.gov/geo/maps-data/maps/pdfs/thematic/2010ua/UA2010_NewUAs_Map.pdf

https://www.census.gov/geo/maps-data/maps/pdfs/thematic/2010ua/UA2010_UAs_and_UCs_Map.pdf

7 Agglomerating Forces

• Wage Premium

• Increasing Returns and costs of moving goods

• The costs of moving people

• Informational spillovers

• Learning in cities

• Future of the Informational city

Wage Premium

• Quantity of people living in cities – benefits

• Wage premium paid to urban over rural workers

• More productive

• Non- work related benefits

Increasing Returns and Costs - Goods

• Firms come to cities to reduce transportation costs – Both input and products

• Importance of fixed start-up costs

• Recent advances in technology have decreased transportation costs – Decreases the importance of transportation costs – but still important – If only transportation costs mattered cities would cease to exist

8 Costs of Moving People

• Division of labor - primary advantage of market size

• Lower transportation costs of people – between jobs, etc.

• Workers have increased bargaining power

• Opportunity costs – basic cost of moving people

Informational Spillovers

• Geographic proximity – allows ideas to travel faster

• Cities reduce the costs of moving ideas

• Knowledge externalities

• Empirical evidence – Concentrated industrial parks – Diversified cities

• Competition spurs growth and innovation

Learning in Cities

• Urban density – faster rate of interaction between people – Human capital accumulation is faster – More effective if knowledgeable people

• Learning increases productivity

• Young people go to city to learn – College educated disproportionately represented in cities – Wage dynamics – Urban wage premium – Higher wages in cities with higher levels of human capital – Faster growth rates

9 Future of the Informational City

• Technology will not replace face-to-face contact

• Technology infrastructure provides comparative advantage

• Technology is not a substitute but rather a complement for face-to-face contact

• Silicon Valley example

Congesting Forces

• Cost of living and commuting

• Pollution costs

• Crime and Urban anonymity

• Problem of differential selection

Costs

• Costs of Living and Commuting

– Transportation and housing costs both important • Inverse relationship between housing value and transportation costs

• Pollution costs

– Pollution costs have decreased in U.S. • Still a cost to living in cities • See previous notes on externalities

10 Crime and Urban Anonymity

• Positive correlation between crime rates and city size

• Model that predict cities for legal activities also suggest criminal activities will benefit – Potential scale economies and market size – Social networks

• Lower probability of being arrested – Overworked police force – Cities are intrinsically more anonymous – Weaker social groups – greater mobility

• Cities attract individuals in poverty

Problem of Differential Selection

• Differential movement of the poor into cities – why higher poverty rates

• Reasons – Basic urban theory – demand for physical space – Transportation costs lower – public transportation – Public services – Poorer schools – Creation of social networks

• People WTP to leave the city to avoid social problems associated with poverty

Glaeser’s Urban Life - Cycle

• New cities attract all income groups – economic opportunities

• Poorer slower to migrate – higher costs

• Poor create social problems which stems from the city’s growth

• Social problems induce wealthier people to leave

• Start new urban areas

11 Governments Do and Should Do

• Create large permanent structures – Better way – property price congestion

• Used quantity controls – Better way – use cost effective and / or economic efficient incentives

• Redistributive activities rather than productive efficiency

• Cities welfare depends on local and well as central government

Glaeser’s Conclusions

• Future is bright for relatively homogenous low density western agglomerations

• Older poor heterogeneous cities will struggle

• Future one of very specialized agglomerations filled with very particular income groups – Problem innovation and growth

•What do you think?