Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Introduction to Urban Economics;

The Monocentric City Model

Nathan Schiff
Shanghai University of Finance and Economics

Graduate Urban Economics, Lecture 1

February 22, 2016

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Introduction
One of the biggest questions in urban economics–and urban
studies generally–is what forces drive the spatial distribution of
a city’s population
1. Are there any general distribution patterns that seem to
hold across cities and countries
2. What is the relationship between housing prices, land
rents, and density?
3. What determines which types of people (ex: income, job
type) live where?
4. Can we predict the effect of policy changes?
To get a better idea of these questions let’s look at some maps
Source: Gilles Duranton November 7, 2015 presentation and
Alain Bertaud, Feb 2002 presentation

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Land Price Map, Source: Duranton

Land prices in Berlin

Source: Ahlfeldt, Redding, Sturm, and Wolf (2014) 3 / 53

Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Land Use Maps, Source: Duranton

Land use in Paris

Multi-family residential
Single-family residential
Commercial
Transport
Open space
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Land Use Maps, Source: Duranton

Land use in Paris

100%

Open space
Transport
75%
Share of land by use

50%

25% Built−up

0%
−30 −20 −10 0 10 20 30
Distance to Notre Dame (km.) 5 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Land Use Maps, Source: Duranton

Land use in Paris

100%

Commercial
Share of built−up land by use

75%

50%

Single−family
residential
25%

Multi−family residential

0%
−30 −20 −10 0 10 20 30
Distance to Notre Dame (km.)
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

3D Density Map, Source: Bertaud

Distribution of population in Abidjan

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

3D Density Map, Source: Bertaud

Distribution of population in Hong Kong

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

3D Density Map, Source: Bertaud

Spatial
distribution
of population
in 7 major
metropolis
represented at
the same
scale

10

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Common Patterns
There are very different densities across these cities–do you
see any common patterns?
One thing we generally see is a pattern of declining density
radiating from one center, or sometimes multiple centers
From the Berlin map we saw a similar pattern with land prices
What are the main forces that could generate this pattern?
What happens when these change?
Specific questions we could ask:
1. What should happen to the spatial distribution of
population as Shanghai builds more subway lines
extending into far districts?
2. What should happen to Shanghai residents’ quality of life
as transportation infrastructure improves? Does it depend
on the hukou system?
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Monocentric City Model: goals and main idea

Very famous Urban Economics model, developed by William
Alonso (1964), Edwin Mills (1967), and Richard Muth (1969)
The goal of the model is to explain the spatial distribution of
population in a city.
Main mechanism is the relationship between commuting costs,
housing price, and housing consumption
We are interested in deriving a set of gradients and
comparative statics
Results:
1. Housing prices decrease with distance from the Central
Business District (CBD)
2. Housing consumption increases with distance from CBD
3. Density and capital-to-land ratio decrease with distance
from CBD
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Model Framework

• All residents are identical, consume housing and

numeraire good
• Price of numeraire good does not vary with location but
housing price can
• All jobs are located in center of city (CBD), residents
commute with positive transportation cost
• Land is owned by absentee landlords (not in city),
developers rent land and build housing in perfectly
competitive market with CRS production
• In equilibrium: all residents have same utility, everyone
must have housing in city
In my slides I will mostly use Brueckner’s notation with
matching equation labels.

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Residents Maximization Problem

• Consumers have utility v (z, q) over numeraire z and

housing q
• Commuting cost is τ ∗ x, where x is distance from CBD
• Given wage y and housing price p(x), budget constraint:
z + p(x) ∗ q(x) + τ ∗ x = y
• All residents have equilibrium utility u

Resident utility maximization problem is thus:

max v (y − τ ∗ x − p(x)q(x), q) = u (1)

q

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Residents’ Optimal Consumption

max v (y − τ ∗ x − p(x)q(x), q) = u (1)

q

This maximization problem leads to two conditions: 1)

optimization 2) equal utility
Optimization implies the MRS is equal to ratio of prices:
∂v (y−τ ∗x−p(x)q(x),q)
∂q p
∂v (y−τ ∗x−p(x)q(x),q)
= (2)
1
∂z

The equal utility condition implies:

v (y − τ ∗ x − p(x)q(x), q) = u (3)

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Deriving the Price Gradient

∂v (y−τ ∗x−p(x)q(x),q)
∂q p
∂v (y−τ ∗x−p(x)q(x),q)
= (2)
1
∂z
v (y − τ ∗ x − p(x)q(x), q) = u (3)
If we totally differentiate eq. 3 wrt x:
 
∂v ∂p(x) ∂q(x) ∂v ∂q(x)
∗ −τ − q(x) − p(x) + ∗ = 0 (4)
∂z ∂x ∂x ∂q ∂x

Plugging eq 2 into 4 (envelope theorem) yields:

∂p(x) −τ
= (5)
∂x q(x)

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Price Gradient: Alonso-Muth Condition

∂p(x) −τ
= (5)
∂x q(x)
Price declines with distance from the center as a function of
transportation costs and housing
If we forced all residents to consume equal amounts of housing
q(x) = q̄ then the gradient (slope wrt distance) is constant:
prices must decrease linearly so that all consumers have equal
income (since they have equal consumption)
If housing increases with dist from CBD gradient is convex:
consumers substitute cheaper housing consumption for
numeraire consumption, so prices don’t have to decline as
quickly to compensate consumers

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Alternative Derivation of Alonso-Muth

This same condition can be derived from the expenditure
minimization problem

min z + p(x) ∗ q(x), s.t. v (z, q) = u (1b)

q,z

This gives us the Hicksian demand functions q(p, u),z(p, u)

We then look for the price p(x) where all consumers have utility
u and consumers spend their budget:
z(p, u) + p(x)q(p, u) + τ ∗ x = y
This price function p(x) can be interpreted as the maximum
that consumers can pay for housing at location x such that
utility is u
Urban economists call this the “bid-rent function”; its slope is
the Alonso-Muth condition
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Housing Consumption Gradient

In this model housing price p(x) adjusts so that all residents

have equal utility
Therefore we can work with either Marshallian housing demand
q(p(u), y , x) or Hicksian demand q(p, u, x)
Gradient of Hicksian housing demand is:
dq(p,u,x) ∂q ∂p
dx = ∂p ∗ ∂x >0
Therefore, we know that housing consumption is increasing
with distance; the housing price is cheaper so consumers
substitute towards housing

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Housing Production
The housing construction industry is perfectly competitive with
a concave CRS production function
Input to construction is land L and capital K : H(K , L)
The important part of concavity is that HKK < 0; building higher
is more expensive
The price of capital is i, price of land at x is r (x)
It will turn out to be easier to work with the capital-to-land ratio:
S = K /L
Then, because we assume CRS we can write
L ∗ H(KL ,L) = L ∗ H(S, 1)
Define h(S) ≡ H(S, 1) as housing-per-unit-land
Profit: Π(x) = L ∗ (p(x) ∗ h(S) − i ∗ S − r (x))

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Firm optimization and market structure

With CRS and free entry we have a perfectly competitive

market with construction firms earning zero profit
Similar to the utility maximization problem, this gives two
conditions: 1) FOC for optimal S and 2) zero-profit equation

∂h(S)
p(x) ∗ =i (11)
∂S
p(x) ∗ h(S) − i ∗ S(x) − r (x) = 0 (12)
Totally differentiating these conditions will allow us to derive the
land-rent gradient and capital-to-land ratio gradient

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Deriving land rent and capital-to-land gradient

∂h(S)
p(x) ∗ =i (11)
∂S
p(x) ∗ h(S) − i ∗ S(x) − r (x) = 0 (12)
Define φ as the set of parameters φ = x, τ, y, u
Totally differentiating gives:

∂p ∂h ∂2h ∂S
∗ +p∗ 2
∗ =0 (13)
∂φ ∂S (∂S) ∂φ

∂h ∂S ∂p ∂r
(p ∗ − i) ∗ + h= (14)
∂S ∂φ ∂φ ∂φ

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Land rent and capital-land gradient

Finally, by inserting the FOC (11) into (14) we get:

∂r ∂p
=h∗ (15)
∂φ ∂φ

Re-arranging (13) gives:

∂S ∂h ∂ 2 h −1 ∂p
=− ∗ (p ∗ ) ∗ (16)
∂φ ∂S (∂S)2 ∂φ
∂2h
Our earlier concavity assumption implies that (∂S)2
<0
This gives us:
∂r ∂S
< 0, and , <0 (17)
∂x ∂x

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Population Density

Assume every person lives in a separate house

Then the population at x is the total amount of housing at x
divided by the per-person consumption of housing:
N(x) = H(x)/q(x)
The population density (pop/land) is thus:
D(x) = H(x)/(L ∗ q(x)) = h(s)/q(x)
∂D(x) ∂h(S) ∂S(x) 1 h(S) dq
Differentiating: ∂x = ∂S ∗ ∂x ∗ q(x) − q(x) ∗ dx <0
Density decreases for two reasons: 1) capital-to-land ratio
declines 2) per-person housing consumption increases

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Summary of Results

∂p −τ
= <0 (r1)
∂x q(x)
dq ∂q(p, u) ∂p
= ∗ >0 (r2)
dx ∂x ∂x
∂r ∂p
= h(S) ∗ <0 (r3)
∂x ∂x

∂S ∂h ∂ 2 h −1 ∂p
=− ∗ (p ∗ ) ∗ <0 (r4)
∂x ∂S (∂S)2 ∂x
∂D(x) ∂h(S) ∂S(x) 1 h(S) dq
= ∗ ∗ − ∗ <0 (r5)
∂x ∂S ∂x q(x) q(x) dx

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Comparative Statics

What happens to spatial distribution as income, transportation

cost, population, agricultural land rent, or utility change?
Comparative statics of the model depend upon our assumption
about migration
Closed City Model: no migration, population is exogenous and
equilibrium utility u is determined by the model
Open City Model: free migration no moving frictions, implies
“spatial equilibrium condition” that utility must be equal in every
city; population is endogenous and adjusts to ensure
(exogenous) equal utility u

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Equilibrium Conditions
To cut down on algebra and still maintain intuition we assume:
1) All land can be developed L(x) = 1, and 2) City is on a line
instead of area of circle (1 dimension instead of 2)
Two equilibrium conditions we use to close model:
1) Residents out-bid farmers for use of land, which means city
ends at some x̄ where land rent is equal to agricultural land rent

r (x̄, y, τ, u) = rA (18)

2) Everyone (population N) is housed within boundary of city

(x̄)
Z x̄
D(x)dx = N (19)
0
Note: equation 19 is simpler than in Brueckner due to above
assumptions
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Land Rent at CBD

Following Duranton and Puga (2015) we use:

∂p(x) −τ ∂r (x) ∂p
d1) ∂x = q(x) d2) ∂x = h(S) ∗ ∂x

Then density is: D(x) = − τ1 ∗ ∂r

∂x
This is a very useful way to write density because then:

x̄ x̄
R(x̄) − R(0)
Z Z
1 ∂R
D(x)dx = =− ∗ = =N (1)
0 0 τ ∂x −τ
Land rent differential—rent at CBD vs fringe—is thus
proportional to population and transportation cost:
r (0) − rA = τ ∗ N

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Solving Closed City Model

From the developer’s problem we can write price as a function
of land rent:
iS(r )+r
p(x) = h(S(r )) = C(i, r )
Zero-profit condition means unit price of housing equals unit
cost of housing C(r ), then:
p(0) = C(i, r (0)) = C(i, rA + τ ∗ N)
Then, since utility is equal at all locations, v (x) = v (p(0), y ) = u
With u we can then solve for p(x) function, last task is to find x̄
We know price at fringe must be equal to construction cost at
fringe, can invert to find x̄:
p(x̄) = C(r (x̄)) = C(rA )

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Closed City: Increase in Agricultural Rent

What happens to u, x̄, price and density gradients?

1. Equilibrium utility decreases

2. Fringe contracts x̄1 < x̄0
3. Price gradient shifts up and steeper
4. Density rises everywhere
Basically cuts city at new rA , everyone must live in smaller area

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Agricultural Rent Increase

Price PHxL
50

40

30
rA_1
20

rA_0
10

Dist from CBD HxL

0.5 1.0 1.5 2.0 2.5 3.0 3.5 30 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Agricultural Rent Increase

Housing Consumption qHxL

rA_0
3.0

2.5

2.0

1.5
rA_1
1.0

0.5

Dist from CBD HxL

0.5 1.0 1.5 2.0 2.5 3.0 3.5 31 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Agricultural Rent Increase

Density
1000

800

600

400

rA_1
200
rA_0

Dist from CBD HxL

0.5 1.0 1.5 2.0 2.5 3.0 3.5 32 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Closed City: Population Increase

What happens to u, x̄, price and density gradients?

1. Equilibrium utility decreases

2. Fringe expands x̄1 > x̄0
3. Price gradient shifts up and steeper
4. Density rises everywhere
City expands geographically but not enough so that density at x
is constant

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Population Increase

Price PHxL

60

50

40
N_1
30
N_0
20

10

Dist from CBD HxL

0.5 1.0 1.5 2.0 2.5 3.0 3.5 34 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Population Increase

Housing Consumption qHxL

N_0
3.0

2.5 N_1
2.0

1.5

1.0

0.5

Dist from CBD HxL

0.5 1.0 1.5 2.0 2.5 3.0 3.5 35 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Population Increase

Density

1500

1000
N_1

500 N_0

Dist from CBD HxL

0.5 1.0 1.5 2.0 2.5 3.0 3.5 36 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Closed City: Income Increase

Income and transportation cost changes are complicated
because there are both indirect effects through utility (same as
pop and fringe rent), but also direct effects:
dp ∂p ∂u ∂p
dy = ∂u ∗ ∂y + ∂y
1. Equilibrium utility increases
2. Fringe expands x̄1 > x̄0
3. Price gradient rotates; for this functional form it turns out to
rotate at center, but not always true
4. Density gradient rotates; note that it drops at center just
enough so that price is same despite increase in housing
consumption (same amount of housing, fewer people)
5. For this functional form housing consumption gradient also
rotates; tradeoff between housing and numeraire
consumption (technical detail)
City expands geographically, most people consume more
housing, live further away, increases density away from CBD
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Closed City, Income Increase, Price Gradient

Price PHxL

y_1
40

30
y_0
20

10

Dist from CBD HxL

1 2 3 4 38 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Closed City, Income Increase, Housing Gradient

Housing Consumption qHxL

4
y_1
y_0
3

Dist from CBD HxL

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Closed City, Income Increase, Density Gradient

Density

800

600 y_0

400
y_1

200

Dist from CBD HxL

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Closed City: Decrease in Transportation Cost

What happens to u, x̄, price and density gradients?

1. Equilibrium utility increases

2. Fringe expands x̄1 > x̄0
3. Price gradient rotates: for x < x ∗ p(x) declines, x > x ∗
p(x) increases
4. Where price falls density falls, density rises where price
rises
Basically more distant locations become more attractive,
decreasing demand for central locations

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Transportation Cost Decrease

Price PHxL

40

30

20

Τ_0
10 Τ_1

Dist from CBD HxL

1 2 3 4 5 6 42 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Transportation Cost Decrease

Housing Consumption qHxL

4
Τ_1
Τ_0
3

Dist from CBD HxL

1 2 3 4 5 6 43 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Example: Closed City, Transportation Cost Decrease

Density

800

600

Τ_0
400

200
Τ_1

Dist from CBD HxL

1 2 3 4 5 6 44 / 53
Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Open City Comparative Statics

Open city comparative statics are easier because utility is fixed
due to population flow
We can therefore compute comparative statics directly from the
variable equations, without worrying about the indirect effect of
utility
For example: decrease in transportation cost must raise prices
(to ensure utility doesn’t change), expand the fringe, decrease
housing consumption, and thus lead to higher density and a
higher overall population
Can also interpret open city comparative statics as “short-run”
and “long-run”:
First, the parameter change induces the closed city equilibrium,
which has a different utility
Then, population flows in or out to restore original utility level,
with resulting closed-city effect of population change (long-run)
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Ex: OPEN City, Transportation Cost Decrease

Price PHxL

40

30

20

Τ_0 Open Τ_2

10
Τ_1
Dist from CBD HxL
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Ex: OPEN City, Transportation Cost Decrease

Density

800

600

Τ_0
400

200
Τ_1 Open Τ_1

Dist from CBD HxL

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Some empirical gradients

The following are density estimates from various cities collected

by Bertaud and Malpezzi.
The data is not public, CBD definition is subjective,year is
unclear; still quite informative
Source: Bertaud and Malpezzi, “The Spatial Distribution of
Population in 48 World Cities: Implications for Economies in
Transition”, World Bank Report 2003

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Empirical Density Gradients

Abidjan Ahmedabad
250

200
Density (Persons per hectare)
Density (Persons per hectare)
200

150
150

100
100

50
50

5 10 15 5 10 15

Distance(km) Distance(km)

Bangalore Bangkok
300

300
Density (Persons per hectare)
Density (Persons per hectare)
250

250
200

200
150

150
100
100

50
2 4 6 8 10 12 2 4 6 8 10 12 14

Distance(km) Distance(km)

Barcelona Beijing
300
300

Density (Persons per hectare)

Density (Persons per hectare)

250
250
200

200
150

150
100

100
50

50

5 10 15 20 2 4 6 8 10 12 14

Distance(km) Distance(km)
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Empirical Density Gradients

Seoul
Seoul + New Town
350

Density (Persons per hectare)

Density (Persons per hectare)

300
300
250

200
200

100
150
100

0
5 10 15 0 10 20 30

Distance(km) Distance(km)

Shanghai Singapore

250
1000

Density (Persons per hectare)

Density (Persons per hectare)

200
800

150
600

100
400

50
200

0
2 4 6 8 10 12 14 5 10 15 20

Distance(km) Distance(km)

Sofia 250 St Petersburg

Density (Persons per hectare)

Density (Persons per hectare)

150

200
150
100

100
50
50

2 4 6 8 10 12 5 10 15

Distance(km) Distance(km)
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Empirical Density Gradients

Chicago Cracow
70

120
Density (Persons per hectare)
60
Density (Persons per hectare)

100
50

80
40

60
30

40
20

20
10

0
0 20 40 60 80 5 10 15

Distance(km) Distance(km)

Curitiba Guangzhou
120
Density (Persons per hectare)

Density (Persons per hectare)

600
100

400
80

200
60

0
5 10 15 2 4 6 8

Distance(km) Distance(km)

Hongkong 25 Houston
1000

Density (Persons per hectare)

Density (Persons per hectare)

20
800

15
600
400

10
200

5
0

0 5 10 15 20 25 30 0 20 40 60

Distance(km) Distance(km)

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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

Concluding: Weaknesses of the Model

Elegant analytical framework has a cost: some unrealistic and
non-trivial assumptions

1. Everyone commutes to job in CBD; many cities are

polycentric (multiple job centers)
2. Housing stock is perfectly flexible; in fact, housing stock is
quite durable and this durability is important
3. No zoning or regulations; empirical work argues these
frictions can be significant
4. Residents are identical (this can be relaxed
somewhat–different bid rent curves by type)
Nonetheless, a very important and flexible model, continues to
be widely used
Next Class: Read Brueckner article and Baum-Snow et. al
(available on my website)
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Motivation and Introduction Residents Housing Sector Equilibrium Comparative Statics Some Empirical Evidence Concluding T

References for this Lecture

This lecture is based on the following references:

1. Brueckner,Jan K., Handbook of Regional and Urban
Economics, Volume 2, Ch. 20, 1987
2. Fujita, Masahisa, Urban Economic Theory, Ch. 2-3, 1989
3. Duranton, Gilles and Puga, Diego, Handbook of Economic
Growth, Volume 2B, Ch. 5, 2014
4. Duranton, Gilles, Empirics of housing, land use, and
location choice, Presentation given at Frontiers of Urban
Economic Conference, November 7, 2015

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