Topics in Urban and Spatial Economics

Topics in Urban and Spatial Economics AED Econ 7415: Advanced Regional Economics 2 (Part 1) Department of Agricultural, Environmental, and Development Economics Ohio State University Spring Quarter 2018 INSTRUCTOR: Elena Irwin, Professor Office: Room 316, Ag. Admin Building; Email: irwin.78@osu.edu Office Hours: I do not have formal office hours. A good time to talk is after class. I am also happy to set up a meeting by appointment. Email is the best way to reach me. Time and location: 11:10 12:30 Monday and Wednesday, AA246 Course website: Canvas Course description: This course builds on AED Econ 7410 Regional Economics I and is designed to further introduce you to topics in urban and spatial economics. Part 1 of this course is taught by Prof. Elena Irwin and part 2 is co-taught by Prof. Alessandra Faggian and Prof. Jean Michel Guldmann. In part 1 of this course, we will focus on the spatial dimensions of urban areas, including the key determinants of intra-urban spatial structure, such as transportation costs, amenities and spatial interactions. In addition, we will consider aspects of housing markets and factors influencing housing demand and supply, urban growth, land development, urban decline and renewal, and price dynamics. Our primary focus will be on applied economic papers on key topics, many of which have a spatial dimension e.g., they use spatial data, ask interesting questions about space, or seek to account for space in some way. My hope is to expose you to a range of research so that you may further develop your own ideas. Assignments: A brief description of course assignments is given below. A more detailed description for the first three assignments will be handed out in class. 1. Research proposal: You will identify a research question of your choosing that is on an urban or spatial economics topic (one of the topics from this course, or a related topic). You will write a 5- page research proposal that addresses the following points: (i) background and significance, (ii) objectives, (iii) data and methods, (iv) expected contribution, (v) estimated budget and timeline. The proposal will be evaluated as if it were a grant proposal to an external government agency (e.g., National Science Foundation, US Department of Agriculture) and is intended to give you some exposure to formulating your research ideas in this fashion. 2. Econometrics homework: You will work with housing market data to estimate a series of models, test one or more hypotheses and provide a written synthesis of your results and a discussion in terms of the research question. 3. In-class journal article presentation: You will be required to present an article in class. You may choose a paper from the syllabus (not an overview paper and not a required paper) or you can seek my approval for a different paper that is on a related topic. We will try to match up the paper topic and the course topic of the week as best possible. 4. Readings and class discussions: Lectures and class discussion are equally important aspects of the class. I expect active discussion of required papers in class these papers are noted with a (*) on the syllabus. This requires you to read assigned papers before the class period they are discussed! The schedule for discussing these papers is given with the reading list below. All readings are posted under "Files" on Canvas. 1

A note on class participation This is a small class and I will seek to foster discussion. I understand that some people are more comfortable than others speaking in class, but critical thinking and public speaking are important academic skills. I will do my best to foster discussion and include everyone. Towards that end, don t be surprised if I ask you to hold your thought, if you have already been active in discussion, and give someone else a chance who hasn t yet contributed. Deadlines: All assignments are due at the beginning of the class unless otherwise noted. Late assignments will be accepted only within a week of the due date and will receive an automatic 10% deduction. Mar 15: Identify research proposal topic and question Mar 21: Econometrics homework due Apr 8: First draft of research proposal due (not graded) Apr 22: Final draft of research proposal due Grading: The course grade is a function of your performance in both Part 1 and 2 of 7415. Your grade is based on the following: Research proposal... 35% Econometrics homework... 25% In-class participation (presentation & class discussions)... 15% Assignment by Prof Guldmann... 25% Disabilities: Any student who feels s/he may need an accommodation based on the impact of a disability should contact me privately to discuss your specific needs. Academic Misconduct: Academic misconduct of any kind is not acceptable. If I suspect that a student has committed academic misconduct in this course, I am obligated by University Rules to report my suspicions to the Committee on Academic Misconduct. If COAM determines that you have violated the University s Code of Student Conduct (i.e., committed academic misconduct), the sanctions for the misconduct could include a failing grade in this course and suspension or dismissal from the University. 2

READING LIST AED Econ 7415: Advanced Regional Economics 2 (Part 1) The following is a tentative course schedule and reading list that is subject to change. Papers listed marked with a (*) are required reading and you should come prepared to discuss these in class. The unmarked papers are background readings or optional papers that I may draw on in class and encourage you to read. JAN 9, 11: Overview of course and fundamental features of spatial problems in economics What is special about space? Urban spatial structure, spatial pattern versus spatial process, empirical challenges, first nature and second nature advantages, durability, spatial impossibility theorem, spatial equilibrium. Brueckner, J.K. 2011. Introduction. Chapter 1, pp. 1-21. Lecture on Urban Economics. Cambridge MA: The MIT Press. Duranton, G. 2008. Spatial economics. The New Palgrave Dictionary of Economics On-Line. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan. Accessed 12/17/2013: http://www.dictionaryofeconomics.com/article?id=pde2008_s000195 Duranton, G. and Puga, D. 2004. Micro-foundations of urban agglomeration economies. In Handbook of Regional and Urban Economics, vol. 4, ed. V. Henderson and J.-F. Thisse. Amsterdam: North-Holland. Glaeser, Edward L. 2007. The economics approach to cities. NBER Working Paper 13696. Ottaviano, G. and J.F. Thisse. Agglomeration and economic geography. In Handbook of Regional and Urban Economics, vol. 4, ed. V. Henderson and J.-F. Thisse. Amsterdam: North-Holland. * Chauvin et al. 2016. What is different about urbanization in rich and poor countries? Cities in Brazil, China, India and the United States. Journal of Urban Economics. Forthcoming. JAN 16: Martin Luther King Holiday -- No class JAN 18, 23, 25, 30: Prof Ale Faggian lecturing FEB 1 and 6: Spatial equilibrium, travel costs and the urban bid rent model Fundamental role of transportation costs in household demand for location and housing, closed and open city models, city size, urban density. evidence of transportation costs on household location and urban growth. * Brueckner J. K. 1987. The structure of urban equilibria: A unified treatment of the Muth-Mills model. Handbook of Regional and Urban Economics, Volume 2, Chapter 20, North-Holland. * Brueckner, J.K. 2011. Analyzing urban spatial structure. Chapter 2, pp. 23-50. Lecture on Urban Economics. Cambridge MA: The MIT Press. Glaeser, E. 2008. Spatial equilibrium in the Alonzo-Muth-Mills model. Chapter 2, pp. 18-44. Cities, Agglomeration, and Spatial Equilibrium. Oxford: Oxford University Press. 3

Rosen, S. 1974. Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy. 82(1): 34-55 De Bruyne, K., & Van Hove, J. 2013. Explaining the spatial variation in housing prices: an economic geography approach. Applied Economics, 45(13), 1673-1689. * Lin, Y. 2016. Travel costs and urban specialization patterns: Evidence from China s high speed railway system. Journal of Urban Economics. Forthcoming. McMillen, D.P. 1996. One hundred fifty years of land values in Chicago: a nonparametric approach. Journal of Urban Economics 40: 100-24. FEB 8 and 13: Income, amenities and household location What are the predictions of the urban bid rent model with multiple income groups? Role of spatial amenities, transportation costs, city versus suburban locational choice. Role of amenities and disamenities in household locational choice. * Brueckner, J.K., T. Jacques-Francois, Y. Zenou. 1999. Why is central Paris rich and downtown Detroit poor? An amenity-based theory. European Economic Review, 43: 91-107. Roback, J. 1982. Wages, rents, and the quality of life. Journal of Political Economy 90: 1257-1278 Tiebout, C. 1956. A pure theory of local expenditures. Journal of Political Economy 64: 416 424. * Albouy, D., B. Lue. 2015. Driving to opportunity: Local wages, commuting, and sub-metropolitan quality of life. Journal of Urban Economics. 89: 74-92. Banzhaf, S. and R. Walsh. 2008. Do people vote with their feet? An empirical test of Tiebout's mechanism. American Economic Review 98(3): 843-863 Bayer, P., N. Keohane and C. Timmins. 2009. Migration and hedonic valuation: The case of air quality. Journal of Environmental Economics and Management, 58, 1-14. * Bieri, D., N.V. Kuminoff, J.C. Pope. 2014. National expenditures on local amenities. Working Paper. Accessed online 1/3/2017: http://jarenpope.weebly.com/uploads/2/9/7/3/29731963/2014_bkp_wp.pdf FEB 15 and 20: Land development, regulation and housing supply Determinants of land rents and urbanization in a growing city, optimal timing of land development, role of uncertainty. Effect of land use regulations on timing of land development and housing supply, role of geography in determining housing supply elasticities. Capozza, D. and R. Helsley. 1989. The fundamentals of land prices and urban growth. Journal of Urban Economics 26(3): 295-306. Capozza, D. and R. Helsley. 1990. The stochastic city. Journal of Urban Economics 28(2): 187-203. Dixit, A. and R. Pindyck. 1994. Investment Under Uncertainty, Chapters 1 and 2, pp. 3-58. Princeton University Press (for background reading) Gyourko, J. 2009. Housing supply. Annual Review of Economics, 1(1): 295-318. 4

* Gyorko, J. and R. Molloy. 2015. Regulation and housing supply. Handbook of Regional and Urban Economics Volume 5. 2015. G. Duranton, J.V. Henderson, W.C. Strange (eds): Amsterdam: North- Holland. pp. 1289-1337. Cunningham, C. 2007. Growth controls, real options and land development. Review of Economics and Statistics 89 (2): 343 358 (Note: for theoretical foundation paper, see: Capozza, D. and Y. Li. 2002. Optimal land development decisions. Journal of Urban Economics 51: 123-42). Mayer, C., and C. Somerville. 2000. Residential construction: Using the urban growth model to estimate housing supply. Journal of Urban Economics 48: 85 109 * Mayer, C., and C. Somerville. 2000. Land use regulation and new construction. Regional Science and Urban Economics, 30(6): 639-662. * Saiz, A. 2010. The geographic determinants of housing supply. Quarterly Journal of Economics. 125 (3): 1253-1296 Turner, M. A., Haughwout, A., and Van Der Klaauw, W. 2014. Land use regulation and welfare. Econometrica 82(4): 1341-1403. FEB 22 and 27: Durable housing, urban decline and redevelopment Differences in rate of urban growth versus urban decline, implications of durable housing for growth and decline. Long-run cycles of urban decline and renewal, the role of aging housing stock, redevelopment and social externalities. * Brueckner, J., Lectures on Urban Economics, Ch. 3, Section 3.5. * Glaeser, E. and J. Guorko. 2005. Urban decline and durable housing. Journal of Political Economy 113(2): 345-375. * McMillen, D., and O Sullivan, A. 2013. Option value and the price of teardown properties. Journal of Urban Economics, 74, 71-82. * Rosenthal, S. 2008. Old homes, externalities, and poor neighborhoods: A model of urban decline and renewal. Journal of Urban Economics 63(3): 86-840. MAR 1 and 6: Suburbanization and sprawl Causes of urban decentralization, suburbanization, urban sprawl. Central city redevelopment versus new suburban land development. Effect of transportation on suburbanization and urban growth. Anglin, Paul M., et al. 2014. Patterns of growth in Chinese cities: Implications of the land lease. Journal of Urban Economics 83 (2014): 87-107. Brueckner, J.K. and R. Helsley. 2011. Sprawl and blight. Journal of Urban Economics 69(2): 205-213. Glaeser, E. and M. Kahn. 2004. Sprawl and urban growth. Handbook of Regional and Urban Economics, Vol. 4, J.Vernon Henderson, JF Thisse (eds). Amsterdam: North-Holland: 2481-2527 * Nechyba, T., and R. Walsh. 2004. Urban sprawl. Journal of Economic Perspectives 18: 177 200 5

Baum-Snow, N. 2007. Did highways cause suburbanization? Quarterly Journal of Economics 122 (2):775-805. Baum Snow, N. et al. 2016. Highways, market access, and urban growth in China. Working Paper. Accessed online 1/3/2017: http://www.lse.ac.uk/geographyandenvironment/pdf/ HighwaysMarket%20AccessUrban%20Growth%20in%20China.pdf Brueckner JK, Fansler DA. 1983. The economics of urban sprawl: theory and evidence on the spatial sizes of cities. The Review of Economics and Statistics 65(3):479-482 * Burchfield, M., H.G. Overman, D. Puga, and M.A. Turner. 2006. Causes of sprawl: A portrait from space. Quarterly Journal of Economics May 121(2): 587-633. Irwin, E.G. and N.E. Bockstael. 2002. Interacting agents, spatial externalities, and the endogenous evolution of residential land use pattern. Journal of Economic Geography, 2(1): 31-54. * Molloy, R, H Shan. 2013. The effect of gasoline prices on household location. Review of Economics and Statistics 95(4): 1212-1221. MAR 8: Catch up day MAR 13 and 15: OSU Spring Break MAR 20 and 22: Housing market dynamics DiPasquale, Denise, and William C. Wheaton. 1994. Housing market dynamics and the future of housing prices. Journal of Urban Economics 35(1): 1-27. * Glaeser, E. L., Gyourko, J., Morales, E., & Nathanson, C. G. 2014. Housing dynamics: An urban approach. Journal of Urban Economics, 81, 45-56. Glaeser, E. L., Gyourko, J., & Saiz, A. 2008. Housing supply and housing bubbles. Journal of Urban Economics, 64(2), 198-217. * DeFusco, A. A., Ding, W., Ferreira, F. V., & Gyourko, J. 2015. The role of contagion in the American housing boom. SSRN Working Paper. Access online 01/08/2017: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2696695 Gyourko, J., Mayer, C., & Sinai, T. (2013). Superstar cities. American Economic Journal: Economic Policy, 5(4), 167-199. Holly, S., Pesaran, M. H., & Yamagata, T. 2011. The spatial and temporal diffusion of house prices in the UK. Journal of Urban Economics, 69(1), 2-23. Hwang, M., & Quigley, J. M. 2006. Economic fundamentals in local housing markets: evidence from US metropolitan regions. Journal of Regional Science, 46(3), 425-453. Wu, J., Gyourko, J., & Deng, Y. 2012. Evaluating conditions in major Chinese housing markets. Regional Science and Urban Economics, 42(3), 531-543. MAR 27 Wrap-up 6