The Economics Approach to Cities / Edward L. Glaeser.

By:

Glaeser, Edward L

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w13696.Publication details: Cambridge, Mass. National Bureau of Economic Research 2007.Description: 1 online resource: illustrations (black and white)Subject(s):

R0 - General

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: The economic approach to cities relies on a spatial equilibrium for workers, employers and builders. The worker's equilibrium implies that positive attributes in one location, like access to downtown or high wages, are offset by negative attributes, like high housing prices. The employer's equilibrium requires that high wages be offset by a high level of productivity, perhaps due to easy access to customers or suppliers. The search for the sources of productivity differences that can justify high wages is the basis for the study of agglomeration economies which has been a significant branch of urban economics in the past 20 years. The builder's equilibrium condition pushes us to understand the causes of supply differences across space that can explain why some places have abundant construction and low prices while others have little construction and high prices. Since the economic theory of cities emphasizes a search for exogenous causes of endogenous outcomes like local wages, housing prices and city growth, it is unsurprising that the economic empirics on cities have increasingly focused on the quest for exogenous sources of variation. The economic approach to urban policy emphasizes the need to focus on people, rather than places, as the ultimate objects of policy concern and the need for policy to anticipate the mobility of people and firms.

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Previous	nber w13693 Net Worth and Housing Equity in Retirement /	nber w13694 The Reaction of Consumer Spending and Debt to Tax Rebates -- Evidence from Consumer Credit Data /	nber w13695 Private Deception and the Rise of Public Employment Offices in the United States, 1890 - 1930 /	nber w13696 The Economics Approach to Cities /	nber w13697 Parental Leave Policies and Parents' Employment and Leave-Taking /	nber w13698 Firm Level Heterogeneous Productivity and Demand Shocks: Evidence from Bangladesh /	nber w13699 The Bidder's Curse /	Next

December 2007.

The economic approach to cities relies on a spatial equilibrium for workers, employers and builders. The worker's equilibrium implies that positive attributes in one location, like access to downtown or high wages, are offset by negative attributes, like high housing prices. The employer's equilibrium requires that high wages be offset by a high level of productivity, perhaps due to easy access to customers or suppliers. The search for the sources of productivity differences that can justify high wages is the basis for the study of agglomeration economies which has been a significant branch of urban economics in the past 20 years. The builder's equilibrium condition pushes us to understand the causes of supply differences across space that can explain why some places have abundant construction and low prices while others have little construction and high prices. Since the economic theory of cities emphasizes a search for exogenous causes of endogenous outcomes like local wages, housing prices and city growth, it is unsurprising that the economic empirics on cities have increasingly focused on the quest for exogenous sources of variation. The economic approach to urban policy emphasizes the need to focus on people, rather than places, as the ultimate objects of policy concern and the need for policy to anticipate the mobility of people and firms.