Urban Economics

WWS 538, Spring 2018

Tuesdays, 6:00pm to 9:00pm, Robertson Hall 15
Woodrow Wilson School, Princeton University

Syllabus

Overview: This is a course in urban and regional economics. We will study the main economic forces that lead to the
existence of cities and regional agglomeration. In particular we will study the theory and evidence on the emergence of
cities and their effect on worker productivity, urban amenities, and congestion. We will discuss the problems in measuring
these urban characteristics, the methodologies to do it, as well as the design of optimal urban policy. We will also study
the economic theory and evidence on the internal structure of cities together with the urban and housing policies that can
enhance urban living. Finally, the course will analyze the role cities play in aggregate economic development.

Grading: Your grade will be based on class participation, a class presentation, and a course project. Class participation
consists of reading the papers assigned for the class and being ready to discuss them. The class presentation will consist
of an urban policy project. A written draft of your project is due on Monday May 14. The project should consist of a policy
proposal on an urban issue. It can range from a specific policy for a specific city, to a wide ranging policy for a system of
cities in a country. The policy proposal should be clearly structured, have a policy recommendation, as well as a clear
discussion of the argument in favor and against its implementation. Your argument should be based on relevant data and
theory. Class participation will count for 30% of your grade, the class presentation for another 20% of your grade and the
final project for 50%.

Outline and Readings:

This syllabus, with the links to my notes and all papers, can be downloaded from the course website at:

http://www.princeton.edu/~erossi/WWS538.pdf
 Introduction and Organization

 A City Model
 Notes for Lecture 1
* Ahlfeldt, Redding, Sturm, & Wolf “The Economics of Density: Evidence from the Berlin Wall,”
Econometrica (2015)
* Ahlfeldt, Redding & Sturm, “The Quantitative Evaluation of Urban Transport Infrastructure
Improvements,” working paper (2016)
* Harari, “Cities in Bad Shape: Urban Geometry in India,” working paper (2017).
* Lucas & Rossi-Hansberg, “On the Internal Structure of Cities,” Econometrica (2002)
* Lucas, “Externalities and Cities,” Review of Economic Dynamics (2001)
* Rossi-Hansberg, “Cities under Stress,” Journal of Monetary Economics (2004)
* Rossi-Hansberg, “Optimal Urban Land Use and Zoning,” Review of Economic Dynamics (2004)
* Waddell & Sarte, “From Stylized to Quantitative Spatial Models of Cities,” Economic Quarterly (2016)

 Agglomeration Forces
 Notes for Lecture 2
* Bleakley & Lin, “Portage and Path Dependence,” Quarterly Journal of Economics (2012)
* Davis & Weinstein, “Bones, Bombs, and Break Points: The Geography of Economic Activity,” American
Economic Review (2002)
* Duranton & Puga, “Micro-Foundations of Urban Agglomeration Economies,” Handbook of Urban and
Regional Economics (2004)
* Greenstone, Hornbeck & Moretti, “Identifying Agglomeration Spillovers: Evidence from Winners and
Losers of Large Plant Openings,” Journal of Political Economy (2010)
* Lin, “The Puzzling Persistence of Place,” Business Review (2015)
* Rosenthal & Strange, “Evidence on the Nature and Sources of Agglomeration Economies” Handbook of
Urban and Regional Economics, (2004)
* Rossi-Hansberg, “Geography of Growth and Development,” prepared for the Oxford Encyclopedia of
Economics and Finance (2018)

 Externalities
 Notes for Lecture 3
* Carlino, Chatterjee, & Hunt, “Urban Density and the Rate of Invention,” Journal of Urban Economics (2007)
* Ciccone & Peri, “Identifying Human Capital Externalities: Theory with Applications,” Review of Economic
Studies (2006)
* Ciccone & Hall, “Productivity and the Density of Economic Activity,” American Economic Review (1996)
* Henderson & Arzaghi, “Networking Off Madison Avenue,” Review of Economic Studies (2008)
* Moretti, “Workers’ Education, Spillovers and Productivity,” American Economic Review (2004)

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 * Rossi-Hansberg, Sarte, & Owens, “Housing Externalities,” Journal of Political Economy (2010)
* Rossi-Hansberg & Owens, “Economics of Housing Externalities” International Encyclopedia of Housing and
Home (2012)
* Saxenian, “Inside-Out: Regional Networks and Industrial Adaptation in Silicon Valley and Route 128,”
Cityscape: A Journal of Policy Development and Research (1996)

 Amenities
 Notes for Lecture 4
* Diamond & McQuade, “Who Wants Affordable Housing in their Backyard?,” Journal of Political Economy
(2017)
* Glaeser, Kolko & Saiz, “Consumer City,” Journal of Economic Geography (2000)
* Owens, Rossi-Hansberg, & Sarte, “Rethinking Detroit,” working paper (2018)
* Rappaport, “Consumption Amenities and City Population Density,” Regional Science and Urban Economics
(2008)
* Rappaport, “Moving to Nice Weather,” Regional Science and Urban Economics (2007)

 Labor Markets and Sorting

 Notes for Lecture 5
* Baum-Snow & Pavan, “Inequality and City Size,” Review of Economics and Statistics (2013)
* Baum-Snow & Pavan “Understanding the City Size Wage Gap,” Review of Economic Studies (2011)
* De la Roca & Puga, “Learning by Working in Big Cities,” Review of Economic Studies (2017)
* Glaeser & Mare, “Cities and Skills,” Journal of Labor Economics (2001)
* Teulings & Gautier, “Search and the City,” Regional Science and Urban Economics (2009)
* Berkes & Gaetani, “Income Segregation and Rise of the Knowledge Economy,” working paper (2017)
* Diamond, “The Determinants and Welfare Implications of US Workers’ Diverging Location Choices by
Skill: 1980-2000,” American Economic Review (2016)

 Commuting, Transport Costs and Congestion Forces

 Notes for Lecture 6
* Baum-Snow & Kahn. “The Effects of Urban Rail Transit Expansions: Evidence from Sixteen Cities,”
Brookings-Wharton Papers on Urban Affairs (2005)
* Baum-Snow, “Did Highways Cause Suburbanization,” Quarterly Journal of Economics (2007)
* Duranton & Turner “The Fundamental Law of Road Congestion,” American Economic Review (2011)
* Duranton & Turner, “Urban Growth and Transportation,” Review of Economic Studies, forthcoming (2011)
* Gonzalez-Navarro & Turner, “Subways and Urban Growth: Evidence from Earth,” working paper (2016)
* Heblich, Redding, & Sturm, “The Making of the Modern Metropolis: Evidence from London,” working
paper (2017)

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 * Monte, Redding & Rossi-Hansberg. “Commuting, Migration, and Local Employment Elasticities”
working paper (2015)
* Saiz, “The Geographic Determinants of Housing Supply,” Quarterly Journal of Economics (2010)

 Measuring Agglomeration
 Notes for Lecture 7
* Combes, Duranton, Gobillon, & Roux, “The Productivity Advantages of Large Cities: Distinguishing
Agglomeration from Firm Selection,” Econometrica (2012)
* Duranton & Overman, “Testing for Localization Using Micro-Geographic Data,” Review of Economic Studies
(2005)
* Ellison & Glaeser, “Geographic Concentration of Industry,” American Economic Review (1999)
* Ellison, Glaeser & Kerr, “What Causes Industry Agglomeration? Evidence from Coagglomeration
Patterns,” American Economic Review (2010)

 Decomposing Agglomeration Through Theory

 Notes for Lecture 7
* Albouy, “Are Big Cities Bad Places to Live? Estimating Quality of Life across Metropolitan Areas,”
working paper (2012)
* Albouy, “What are Cities Worth? Land Rents, Local Productivity and the Capitalization of Amenity
Values,” Review of Economics and Statistics (2016)
* Behrens, Mion, Murata, & Südekum, “Spatial Frictions,” working paper (2013)
* Desmet & Rossi-Hansberg, “Urban Accounting and Welfare,” American Economic Review (2011)
* Desmet & Rossi-Hansberg, “Analyzing Urban Systems: Have Mega-Cities Become Too Large?,” The Urban
Imperative: Towards Competitive Cities, Oxford UP (2015)
* Redding & Rossi-Hansberg, “Quantitative Spatial Economics,” Annual Review of Economics (2017)

 Systems of Cities
 Notes for Lecture 8
* Au & Henderson, “Are Chinese Cities Too Small?,” Review of Economic Studies (2006)
* Behrens, Duranton, & Robert-Nicoud, “Productive cities: Sorting, Selection, and Agglomeration,” Journal
of Political Economy (2014)
* Black & Henderson, “A Theory of Urban Growth,” Journal of Political Economy (1999)
* Dobkins & Ioannides, “Spatial Interactions Among U.S. Cities: 1900-1990,” Regional Science and Urban
Economics, (2000)
* Duranton & Puga, “Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products,”
American Economic Review (2001)
* Duranton, “Urban Evolutions: The Fast, the Slow, and the Still,” American Economic Review (2007)
* Eeckhout, “Gibrat's Law for (All) Cities,” American Economic Review (2004)

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 * Eeckhout, Pinheiro, & Schmidheiny, “Spatial Sorting,” Journal of Political Economy (2014)
* Gabaix, “Zipf's Law and the Growth of Cities,” American Economic Review P&P (1999)
* Gabaix, “Zipf's Law for Cities: An Explanation,” Quarterly Journal of Economics (2004)
* Henderson, “The Sizes and Types of Cities,” American Economic Review (1974)
* Ioannides & Overman “Zipf's Law for Cities: An Empirical Examination,” Regional Science and Urban
Economics (2001)
* Ioannides, Overman, Rossi-Hansberg & Schmidheiny, “The Effect of Information and Communication
Technologies on Urban Structure,” Economic Policy (2008)
* Krugman, “Increasing Returns and Economic Geography,” Journal of Political Economy (1991)
* Rossi-Hansberg & Wright, “Urban Structure and Growth,” Review of Economic Studies (2007)
* Soo, “Zipf's Law for Cities: A Cross-Country Investigation,” Regional Science and Urban Economics (2005)

 Housing and Real Estate

 Notes for Lecture 9
* Campbell, Giglio, & Pathak, “Forced Sales and House Prices”, American Economic Review (2011)
* Davis & Heathcote, “The Price and Quantity of Residential Land in the US,” Journal of Monetary Economics
(2007)
* Glaeser, “Real Estate Bubbles and Urban Development,” Asian Development Review (2017)
* Glaeser & Gyourko, “The Impact of Zoning on Housing Affordability,” Economics Policy Review (2003)
* Glaeser & Gyourko, “Urban Decline & Durable Housing,” Journal of Political Economy (2006)
* Landvoigt, Piazzesi, & Schneider, “The Housing Market(s) of San Diego,” American Economic Review (2015)
* Mian & Sufi, “The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage
Default Crisis,” Quarterly Journal of Economics (2009)
* Quigley & Raphael, “Regulation and the High Costs of Housing” American Economic Review (2005)
* Stroebel, “Asymmetric Information about Collateral Values,” Journal of Finance (2015)