DUSP Courses 1998

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11.410J Cities and Regions: Urban Economics and Public Policy

Fall 1999

M-W 10:30-12:00 William Wheaton

E52-252B

253-1723

wheaton@mit.edu

14.573/11.410J/1.283J

Cities and Regions: Urban Economics and Public Policy.

This course applies economic theory and formal models to the understanding of a range of planning-public policy questions that exist in an urban-regional context. An "intermediate" level understanding of economics is a prerequisite. The course requirements include a mid term and final exam, as well as several problem sets.

COURSE OUTLINE

I. Regional Growth and Convergence.

1. The causes of economic growth, supply versus demand.

2. Regional convergence, response functions, historical decompositions.

II. Increasing Returns and Industrial Policy

1. Static productivity -vs- dynamic growth externalities

2. Industrial concentration, persistance in locational choice

III. Interregional Tax/policy competition

1. Tax and Policy competition models, Nash equilibria.

2. Industrial development incentives, taxes, investment impacts.

EXERCISE: solving a 2-region model with differential taxation

IV. Cities and Urban Transportation (2 weeks)

1. Congestion theory, Bottlenecks, and alternative policies

2. Land use, congestion and public transportation

EXERCISE: 2-mode congestion/investment model

V. Urban Labor Markets

1. Job Decentralization

2. Spatial Mismatch in worker-job matching.

VI. Frictional Urban Housing Markets

1. Models of market friction.

2. Ownership and other policy questions.

VII. Ghettos and the spatial concentration of urban poverty

1. Ghettos and economic outcomes

2. Spatial Segregation versus Discrimination

VIII. Local governments and land controls

1. Zoning and land use externalities

2. Growth controls, extractions

IX. Local Public Goods and services: law enforcement

1. Production function issues and policy efficacy

2. The spatial concentration of crime.

EXERCISE: public choice with production functions

X. Local Public Goods and services: Schooling

1. Public versus Private del8very

2. Institutions and Efficacy: vouchers, performance, contracting...

XI. Tiebout, Sorting and Community competition.

1. Classical "club" models

2. Competition within land markets

3. Empirical tax capitalization

EXERCISE: locational sorting with public goods

XII. Fiscal systems: federal-state-local

1. Assignment of responsibility issues

2. Grants, responses, incentives and control

READING LIST

I. Regional Growth and Convergence

Kim, Sukkoo, "Expansion of Markets and the Geographic Distribution of Economic Activities:..",QJE,CX (4) (November, 1995)

Coulson, N.Edward, Steven Rushen "Sources of Fluctuation in the Boston Economy", JUE,38 (1995), 74-94.

Blanchard, Olivier and Larry Katz, "Regional Evolutions",Brookings Papers on Economic Activity, 1:1992, pp.1-75.

Norton,R. and J.Rees. "The Product Cycle and the Spatial Decentralization of American Mfg.", Regional Studies, 13,2, 1979.

Dumas, Guy, Glenn Ellison, and Edward Glaeser, "Geographic Concentration as a Dynamic Process", NBER Working Paper 6270, November 1997.

Roback, J. "Wages, Rents and the Quality of Life", JPE, Dec., 1982

II. Increasing Returns and Industrial Policy

Moomaw, R. "Productivity and City Size, A Critique", QJE, 96, 1981

Kim, S. "Labor Specialization and the Extent of the Market", JPE, 97, (1989).

Krugman, Paul. "Increasing Returns and Economic Geography", JPE, 99,3,(June 1991) 483-500.

Hulton, Charles and R. Schwab,"Regional Productivity Growth in U.S. Manufacturing", AER, 74,1 (1984) 143-164.

Rauch, James. "Does History matter when it matters only a little: the case of city industrial location", QJE, CVIII,3 (August, 1993).

Jaffee, Adam, M.Trajtenberg, Rebecca Henderson, "Geographic Localization of Knowlege Spillovers", QJE, CVIII,3 (August, 1993).

Henderson, Vern, A. Kunasco,M. Turner, "Industrial Development in Cities", JPE, 103.5 (October, 1995).

III. Interregional Tax and Policy competition

Wildasin, D. "Income Redistribution in a Common Labor Market," AER, 81, 4, (September, 1991), pp. 757-774.

Bucovetsky, S. "Asymetric Tax Competition" Journal of Urban Economics, 30, (1991), 167-181.

Mikesell, J., "Central Cities and Sales Tax Rate Differentials," National Tax Journal, (1970), p. 206.

Wheaton,William, "Decentralize Welfare: Is There a Race to the Bottom? ", MIT (July 1997).

Markusen, J., E. Moroney, N.Orewiler, "Competition in regional environmental Policies...",Journal of Public Economics, 56, (1995), pp. 55-77.

IV. Cities and Urban Transportation

Wheaton, William, "Residential Decentralization, Land Rents, and the Benefits of Urban Transportation Investment," AER, 67, 2, (March, 1977).

Keeler, T. and K. Small,"Optimal Peak-Load Pricing, Investment, and Service Levels on Urban Expressways," JPE, 85, 1, (1977), 1-25.

Arnott, R., A. de Palma, and R. Lindsey, "The Economics of a Bottleneck," Journal of Urban Economics, 27, (1990), 111-130. [AER?]

Wheaton, William. "Urban Land Use and Density in Cities with Congestion", MIT (1996).

Jess Gaspar and E. Glaeser,_Information Technology and the Future of Cities_, Journal of Urban Economics, 43,1, January 1998.

Alex Anas, Rong Xu, _Congestion, Land Use and Job Dispersion: A general Equilibrium Model_, Journal of Urban Economics,45,3, May 1999.pp451-474.

V. Job Location and Urban Labor Markets

Thimothy, Darien, "Intraurban Wage Differentials and Commuting Time", Chapter 3, (MIT, Phd Dissertation), 1995.

Fujita, M. and A. Ogawa, "Equilibrium Land Use Patterns in a Non-Monocentric City," Journal of Regional Science, (November, 1979).

Helseley, R. and A. Sullivan, "Urban Subcenter Formation," Regional Science and Urban Economics, 21, 2, (July, 1991), pp. 255-275.

Rogers, Cynthia, "Job Search and Unemployment Duration...", Journal of Urban Economics, 42,1 (1997), 109-132.

Ihanfeldt, K. and D. Sjoquist, "Job Access and Racial Differences in Youth Unemployment Rates",American Economic Review, 80 (1990),267-276.

Jan Rouwendal,_ Search Theory, Spatial Labor Markets and Commuting_,Journal of Urban Economics, 43,1, January 1998.

VI. Frictional Urban Housing Markets.

Arnott,R, "Housing Vacancies, Thin Markets, Idiosyncratic tastes. _, Journal Real Estate Finance and Economics,2,(1990), pp 5-30.

Per Lundborg, Per Skedinger, _Transaction Taxes in a Search Model of the Housing Market_, Jornal of Urban Economics, 45,2, March 1999.

Denise Dipasquale and Ed Glaeser, _Incentives and Social Capital: are Homeowners better citizens?_, Jornal of Urban Economics, 45,2, March 1999.

VII. Ghettos, segregation and urban Poverty

Boras, George, "Ethnicity, Neighborhoods and Human Capital Externalities", AER, 85, 3, June, 1995.

Galster, G."A Bid Rent Analysis of Housing Market Discrimination", AER, (1977), p144-155.

Rolland Benabou, "Workings of a city: Location, Education and Production", QJE, 108,3,(August, 1993).

Cutler, David, Glaeser, Edward L., "Are Ghettos Good or Bad", Qaurterly Journal of Economics, 62,3, August 1997.

VIII. Development Restrictions and Land Use controls.

Speyrer, Janet, "The Effect of Land Use Restrictions on Market Values of Single Family Homes in Houston", Journal Real Estate Finance and Economics, 2,1989, pp117-130.

Grether, and Mieszkowski, "The effects of land use on the prices of adjacent housing",Journal of Urban Economics,July, 1980

Asabere,P., Hachey,G., Grubaugh,S. "Architecture, Historic Zoning and the Value of Homes." Journal of Real Estate Finance and Economics (September 1989)

Dale-Johnson, David and Hyang Yim, "Coastal Development Moratoria and Housing Prices", Journal of Real Estate Finance and Economics, 3,2, (June 1990).

Jan Brueckner, _Testing for Strategic Interaction among Local Governments.._ Journal of Urban Economics, 44,3, November, 1998,468-493.

IX. Local Public Goods: Law Enforcement

Ehrlich, I., "On the Usefulness of Controling Individuals: Rehalibitation ,Incapacitation, and Deterrence", AER, 71,3, (June, 1981), pp. 307-322.

Levitt, Steven, "The Effects of Prison Population on Crime Rates..." , QJE, CXI (2) (May,1996)

Behrman, J. and S. Craig, "The Distribution of Public Services:...," AER, 77, 1, (March, 1987), pp. 37-49.

Steven Levitt,"Using Electoral Cycles in Polic Hiring to Estimate the Effect of Police on Crime," AER,87,3 (June, 1997), pp270-291.

Scott Freeman, J. Grogger, Jon Sonstelie, "The Spatial Concentration of Crime", Journal of Urban Economics, 40,2 (1996), 216-231.

Robert Helsley and William Strange,"Gated Communities and the Economic Geography of Crime_, Journal of Urban Economics, 46,1 (1999), 80-106.

X. Local Public Goods: Schooling

Schwab, Robert, and Ernest Zampelli, "Disentangling the Demand Function from the Production Function for Local Public Services," Journal of Public Economics, 33, 2, (1987), 245-260.

Wyckoff, J., "The Non-Excludable Publicness of Primary and Secondary Education," Journal of Public Economics, 24, 3, (1984), pp. 331-351.

Card, David, and A. Krueger, "Does School Quality Matter...", JPE,99,4 (1992).

Hanushek, E., "The Economics of Schooling: Production and Efficiency in Public Schools," Journal of Economic Lit., 24, (September, 1986), pp. 1141-1177.

Gramlich and Rubinfeld, "Micro Estimation of Spending Demand Functions," JPE, 90, 3, (1982), pp. 536-560.

Richard Buddin, Joseph Cordes, Sheila Kirby,"School Choice in California: Who chooses private schools?_,Journal of Urban Economics, 44,1,(July, 1988), 110-134.

Epple, Dennis and Richard Romano, "Public Provision of Private Goods", JPE, 104,1, (Febuary, 1996).

XI. Tiebout, sorting and community competition

Wheaton, William, "Land Capitalization, Tiebout Mobility and the Role of Zoning Regulations," Journal of Urban Economics 34, 2 (1993), pp 102-117.

Dusansky, R., M. Ingber, and N. Karatjas, "The Impact of Property Taxation on Housing Values and Rents," Journal of Urban Economics, 10, (September, 1981), pp. 240-255.

Fischel,W. "Fiscal and Environmental Considerations in the Location of Firms", in Mills and Oates(ed),Fiscal Zoning and Land Use Controls, (Lexington, 1975)

Erickson, and Wasylenko, "Firm relocation and site selection in Minn",JUE, July,1980 and "Evidence on fiscal differentials and intrametropolitan firm relocation",Land Economics, August, 1980.

XII. Fiscal Systems and service responsibility

Hochman, Oded, David Pines and Jacques Thisse,"On the Optimal Structure of Local Governments", AER , 85,5, (December 1995).

Feldstein, M., "Wealth Neutrality and Local Choice in Public Education," AER, 65,1, (March, 1975), pp.75-89.

Gramlich, E., "Intergovernmental grants: a Review of the Empirical Evidence," in Oates (ed), Political Economy of Fiscal Federalism, (Lexington, 1977), pp. 219-239.

Wildasin, D. "The Demand for Public Goods in the Presence of Tax Exporting," National Tax Journal, 40, 4, (December, 1987), pp 591-601.

Ladd, H.F.and F.Doolittle, "Which Level of Government should take care of the Poor", National Tax Journal, 35,3 (September,1982).

Thomas Nechyba, "Local Property Taxes and State Income Taxes, the role of Competition and Collusion", JPE, 105, 2, 1997.

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This syllabus may have been updated. To ensure that you're looking at the most recent version, please hit "Reload."
11.410J Cities and Regions: Urban Economics and Public Policy
Fall 1999 M-W 10:30-12:00 William Wheaton E52-252B 253-1723 wheaton@mit.edu 14.573/11.410J/1.283J Cities and Regions: Urban Economics and Public Policy. This course applies economic theory and formal models to the understanding of a range of planning-public policy questions that exist in an urban-regional context. An "intermediate" level understanding of economics is a prerequisite. The course requirements include a mid term and final exam, as well as several problem sets. COURSE OUTLINE I. Regional Growth and Convergence. 1. The causes of economic growth, supply versus demand. 2. Regional convergence, response functions, historical decompositions. II. Increasing Returns and Industrial Policy 1. Static productivity -vs- dynamic growth externalities 2. Industrial concentration, persistance in locational choice III. Interregional Tax/policy competition 1. Tax and Policy competition models, Nash equilibria. 2. Industrial development incentives, taxes, investment impacts. EXERCISE: solving a 2-region model with differential taxation IV. Cities and Urban Transportation (2 weeks) 1. Congestion theory, Bottlenecks, and alternative policies 2. Land use, congestion and public transportation EXERCISE: 2-mode congestion/investment model V. Urban Labor Markets 1. Job Decentralization 2. Spatial Mismatch in worker-job matching. VI. Frictional Urban Housing Markets 1. Models of market friction. 2. Ownership and other policy questions. VII. Ghettos and the spatial concentration of urban poverty 1. Ghettos and economic outcomes 2. Spatial Segregation versus Discrimination VIII. Local governments and land controls 1. Zoning and land use externalities 2. Growth controls, extractions IX. Local Public Goods and services: law enforcement 1. Production function issues and policy efficacy 2. The spatial concentration of crime. EXERCISE: public choice with production functions X. Local Public Goods and services: Schooling 1. Public versus Private del8very 2. Institutions and Efficacy: vouchers, performance, contracting... XI. Tiebout, Sorting and Community competition. 1. Classical "club" models 2. Competition within land markets 3. Empirical tax capitalization EXERCISE: locational sorting with public goods XII. Fiscal systems: federal-state-local 1. Assignment of responsibility issues 2. Grants, responses, incentives and control READING LIST I. Regional Growth and Convergence Kim, Sukkoo, "Expansion of Markets and the Geographic Distribution of Economic Activities:..",QJE,CX (4) (November, 1995) Coulson, N.Edward, Steven Rushen "Sources of Fluctuation in the Boston Economy", JUE,38 (1995), 74-94. Blanchard, Olivier and Larry Katz, "Regional Evolutions",Brookings Papers on Economic Activity, 1:1992, pp.1-75. Norton,R. and J.Rees. "The Product Cycle and the Spatial Decentralization of American Mfg.", Regional Studies, 13,2, 1979. Dumas, Guy, Glenn Ellison, and Edward Glaeser, "Geographic Concentration as a Dynamic Process", NBER Working Paper 6270, November 1997. Roback, J. "Wages, Rents and the Quality of Life", JPE, Dec., 1982 II. Increasing Returns and Industrial Policy Moomaw, R. "Productivity and City Size, A Critique", QJE, 96, 1981 Kim, S. "Labor Specialization and the Extent of the Market", JPE, 97, (1989). Krugman, Paul. "Increasing Returns and Economic Geography", JPE, 99,3,(June 1991) 483-500. Hulton, Charles and R. Schwab,"Regional Productivity Growth in U.S. Manufacturing", AER, 74,1 (1984) 143-164. Rauch, James. "Does History matter when it matters only a little: the case of city industrial location", QJE, CVIII,3 (August, 1993). Jaffee, Adam, M.Trajtenberg, Rebecca Henderson, "Geographic Localization of Knowlege Spillovers", QJE, CVIII,3 (August, 1993). Henderson, Vern, A. Kunasco,M. Turner, "Industrial Development in Cities", JPE, 103.5 (October, 1995). III. Interregional Tax and Policy competition Wildasin, D. "Income Redistribution in a Common Labor Market," AER, 81, 4, (September, 1991), pp. 757-774. Bucovetsky, S. "Asymetric Tax Competition" Journal of Urban Economics, 30, (1991), 167-181. Mikesell, J., "Central Cities and Sales Tax Rate Differentials," National Tax Journal, (1970), p. 206. Wheaton,William, "Decentralize Welfare: Is There a Race to the Bottom? ", MIT (July 1997). Markusen, J., E. Moroney, N.Orewiler, "Competition in regional environmental Policies...",Journal of Public Economics, 56, (1995), pp. 55-77. IV. Cities and Urban Transportation Wheaton, William, "Residential Decentralization, Land Rents, and the Benefits of Urban Transportation Investment," AER, 67, 2, (March, 1977). Keeler, T. and K. Small,"Optimal Peak-Load Pricing, Investment, and Service Levels on Urban Expressways," JPE, 85, 1, (1977), 1-25. Arnott, R., A. de Palma, and R. Lindsey, "The Economics of a Bottleneck," Journal of Urban Economics, 27, (1990), 111-130. [AER?] Wheaton, William. "Urban Land Use and Density in Cities with Congestion", MIT (1996). Jess Gaspar and E. Glaeser,_Information Technology and the Future of Cities_, Journal of Urban Economics, 43,1, January 1998. Alex Anas, Rong Xu, _Congestion, Land Use and Job Dispersion: A general Equilibrium Model_, Journal of Urban Economics,45,3, May 1999.pp451-474. V. Job Location and Urban Labor Markets Thimothy, Darien, "Intraurban Wage Differentials and Commuting Time", Chapter 3, (MIT, Phd Dissertation), 1995. Fujita, M. and A. Ogawa, "Equilibrium Land Use Patterns in a Non-Monocentric City," Journal of Regional Science, (November, 1979). Helseley, R. and A. Sullivan, "Urban Subcenter Formation," Regional Science and Urban Economics, 21, 2, (July, 1991), pp. 255-275. Rogers, Cynthia, "Job Search and Unemployment Duration...", Journal of Urban Economics, 42,1 (1997), 109-132. Ihanfeldt, K. and D. Sjoquist, "Job Access and Racial Differences in Youth Unemployment Rates",American Economic Review, 80 (1990),267-276. Jan Rouwendal,_ Search Theory, Spatial Labor Markets and Commuting_,Journal of Urban Economics, 43,1, January 1998. VI. Frictional Urban Housing Markets. Arnott,R, "Housing Vacancies, Thin Markets, Idiosyncratic tastes. _, Journal Real Estate Finance and Economics,2,(1990), pp 5-30. Per Lundborg, Per Skedinger, _Transaction Taxes in a Search Model of the Housing Market_, Jornal of Urban Economics, 45,2, March 1999. Denise Dipasquale and Ed Glaeser, _Incentives and Social Capital: are Homeowners better citizens?_, Jornal of Urban Economics, 45,2, March 1999. VII. Ghettos, segregation and urban Poverty Boras, George, "Ethnicity, Neighborhoods and Human Capital Externalities", AER, 85, 3, June, 1995. Galster, G."A Bid Rent Analysis of Housing Market Discrimination", AER, (1977), p144-155. Rolland Benabou, "Workings of a city: Location, Education and Production", QJE, 108,3,(August, 1993). Cutler, David, Glaeser, Edward L., "Are Ghettos Good or Bad", Qaurterly Journal of Economics, 62,3, August 1997. VIII. Development Restrictions and Land Use controls. Speyrer, Janet, "The Effect of Land Use Restrictions on Market Values of Single Family Homes in Houston", Journal Real Estate Finance and Economics, 2,1989, pp117-130. Grether, and Mieszkowski, "The effects of land use on the prices of adjacent housing",Journal of Urban Economics,July, 1980 Asabere,P., Hachey,G., Grubaugh,S. "Architecture, Historic Zoning and the Value of Homes." Journal of Real Estate Finance and Economics (September 1989) Dale-Johnson, David and Hyang Yim, "Coastal Development Moratoria and Housing Prices", Journal of Real Estate Finance and Economics, 3,2, (June 1990). Jan Brueckner, _Testing for Strategic Interaction among Local Governments.._ Journal of Urban Economics, 44,3, November, 1998,468-493. IX. Local Public Goods: Law Enforcement Ehrlich, I., "On the Usefulness of Controling Individuals: Rehalibitation ,Incapacitation, and Deterrence", AER, 71,3, (June, 1981), pp. 307-322. Levitt, Steven, "The Effects of Prison Population on Crime Rates..." , QJE, CXI (2) (May,1996) Behrman, J. and S. Craig, "The Distribution of Public Services:...," AER, 77, 1, (March, 1987), pp. 37-49. Steven Levitt,"Using Electoral Cycles in Polic Hiring to Estimate the Effect of Police on Crime," AER,87,3 (June, 1997), pp270-291. Scott Freeman, J. Grogger, Jon Sonstelie, "The Spatial Concentration of Crime", Journal of Urban Economics, 40,2 (1996), 216-231. Robert Helsley and William Strange,"Gated Communities and the Economic Geography of Crime_, Journal of Urban Economics, 46,1 (1999), 80-106. X. Local Public Goods: Schooling Schwab, Robert, and Ernest Zampelli, "Disentangling the Demand Function from the Production Function for Local Public Services," Journal of Public Economics, 33, 2, (1987), 245-260. Wyckoff, J., "The Non-Excludable Publicness of Primary and Secondary Education," Journal of Public Economics, 24, 3, (1984), pp. 331-351. Card, David, and A. Krueger, "Does School Quality Matter...", JPE,99,4 (1992). Hanushek, E., "The Economics of Schooling: Production and Efficiency in Public Schools," Journal of Economic Lit., 24, (September, 1986), pp. 1141-1177. Gramlich and Rubinfeld, "Micro Estimation of Spending Demand Functions," JPE, 90, 3, (1982), pp. 536-560. Richard Buddin, Joseph Cordes, Sheila Kirby,"School Choice in California: Who chooses private schools?_,Journal of Urban Economics, 44,1,(July, 1988), 110-134. Epple, Dennis and Richard Romano, "Public Provision of Private Goods", JPE, 104,1, (Febuary, 1996). XI. Tiebout, sorting and community competition Wheaton, William, "Land Capitalization, Tiebout Mobility and the Role of Zoning Regulations," Journal of Urban Economics 34, 2 (1993), pp 102-117. Dusansky, R., M. Ingber, and N. Karatjas, "The Impact of Property Taxation on Housing Values and Rents," Journal of Urban Economics, 10, (September, 1981), pp. 240-255. Fischel,W. "Fiscal and Environmental Considerations in the Location of Firms", in Mills and Oates(ed),Fiscal Zoning and Land Use Controls, (Lexington, 1975) Erickson, and Wasylenko, "Firm relocation and site selection in Minn",JUE, July,1980 and "Evidence on fiscal differentials and intrametropolitan firm relocation",Land Economics, August, 1980. XII. Fiscal Systems and service responsibility Hochman, Oded, David Pines and Jacques Thisse,"On the Optimal Structure of Local Governments", AER , 85,5, (December 1995). Feldstein, M., "Wealth Neutrality and Local Choice in Public Education," AER, 65,1, (March, 1975), pp.75-89. Gramlich, E., "Intergovernmental grants: a Review of the Empirical Evidence," in Oates (ed), Political Economy of Fiscal Federalism, (Lexington, 1977), pp. 219-239. Wildasin, D. "The Demand for Public Goods in the Presence of Tax Exporting," National Tax Journal, 40, 4, (December, 1987), pp 591-601. Ladd, H.F.and F.Doolittle, "Which Level of Government should take care of the Poor", National Tax Journal, 35,3 (September,1982). Thomas Nechyba, "Local Property Taxes and State Income Taxes, the role of Competition and Collusion", JPE, 105, 2, 1997.