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Learning Outcomes

TopThis module equips students with urban economic theories and empirical methodologies that are the foundation for real estate economics research. Urban economics concerns market and non-market interactions that give rise to increasing returns associated with density and concentration, the spatial organization of economic activities in the presence of such increasing returns, and the consequent welfare and resource allocation implications. The module will survey the fast growing literature in urban economics, highlighting the central theoretical frameworks and methodologies and the connection between urban economics and other fields of economics. The students are expected not only to be familiar with the key literature but also to build up critical thinking abilities in critiquing and developing research ideas.

Prerequisites

TopIntermediate microeconomics and basic econometrics.

Teaching Modes

TopSeminar discussions

The class meetings will focus on questions pertaining to the assigned topics. Students are expected to be familiar with the assigned readings and be prepared to answer questions and raise their own questions.

"In any field that is vibrant, every answer leads to more questions. What happens when there are no more interesting questions? The intellectual energy, interest and growth dry up. Questions are the foundation that build reason. They stimulate thought. Questions help conceptualise the material. Properly defined, they can generate analysis, synthesis and promote creativity." —Prof K Ranga Krishnan (Duke-NUS Graduate Medical School): The necessity of questions.

Syllabus

Top

Date________	Topics / Readings	Notes
Week 1 Jan 11-15	Introduction to urban economics: questions and spatial perspectives What does UE study? What defines UE? In what ways UE contribute to economic inquiry in general? What have shaped the advances in UE in recent decades? Why is increasing return so important to UE? What determine increasing return? Readings Krugman (2009) The increasing returns revolution in trade and geography, American Economic Review, 99(3), 561-571. Fujita (2012) Thünen and the New Economic Geography, Regional Science and Urban Economics. Young, Allyn A. (1928) “Increasing returns and economic progress.” The Economic Journal 38(152), 527-542. Glaeser, E. L., & Gottlieb, J. D. (2009). The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States. Journal of Economic Literature, 47, 983–1028. Glaeser, Edward L. (2001) “The Future of Urban Research: Nonmarket Interactions.” Brookings-Wharton Papers on Urban Affairs 2000: 101–49.	Lecturer FYM
Week 2 Jan 18-22	New Economic Geography What is the geographic setting of the core-peripheral model (CPM)? What is the source of increasing return in CPM? How does the preference for diversity affect increasing return? How do urbanization, transportation cost, and the preference for diversity influence the spatial equilibrium? What is the home-market effect? Readings Paul Krugman (2011) The New Economic Geography, Now Middle-aged, Regional Studies, 45:1, 1-7 FKV, chapter 1-5	Lecturer FYM
Week 3 Jan 25-29	Empirical Methodology − What is causal inference? Why do we need causal relationship? − What is an "identification strategy" in reduced form research design? What are the possible identification strategies? − What is structural estimation? Why do we need structural models? − What are the steps for structural estimation? − What are the pros and cons for reduced form & structural estimation? Readings: Baum-Snow and Ferreira (2015), Causal Inference in Urban and Regional Economics. Handbook5 Thomas Holmes and Holger Sieg (2015) Structural estimation in urban economics. Handbook5	Lecturer QY
Week 4 Feb 1-5	Agglomeration economies − What is agglomeration? − What are the possible explanations to agglomeration? − How to identify different channels of agglomeration spillovers? Readings: Handbook5 (Agglomeration and Innovation; The Empirics of Agglomeration Economics) Ellison, G., Glaeser, E., Kerr, W. (2010). “What causes industry agglomeration? Evidence from coagglomeration patterns,” American Economic Review, 100 (3), 1195-1213. Greenstone, Hornbeck and Moretti (2010). “Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings,” Journal of Political Economy, 118(3): 536-598	Lecturer QY
Week 5, Feb 8-12	CNY: no class
Week 6 Feb 15-19	Internal structure of city Land-use pattern within a city Key factors determining land-use pattern within a city General equilibrium model of urban spatial structure and welfare Readings: Duranton, G., & Puga, D. 2015. Urban land use. Handbook5. Lucas, R. & Rossi-Hansberg, E. 2002 "On the internal structure of cities." Econometrica 70(4): 1445-1476 Rossi-Hansberg, Esteban 2004 “Optimal urban land use and zoning.” Review of Economic Dynamics 7, 69-106 Hanushek and Yilmaz 2010. "Household Location and Sschools in Metropolitan Areas with Heterogeneous Suburbs: Tiebout, Alonso, and Government Policy." NBER Working Paper No. 15915. Zheng, S.; Fu, Y. & Liu, H. 2006. “Housing-choice hindrances and urban spatial structure: evidence from matched location and location-preference data in Chinese cities.” Journal of Urban Economics	Lecturer FYM
Recess week	Feb 20-28
Week 7 Feb 29-Mar 4	Housing Prices and Housing Market Equilibrium Readings: Rosen, Sherwin, “Hedonic Markets and Implicit Prices,” Journal of Political Economy 82 (1974), 34-55. Bajari, Patrick and Matthew E. Kahn, “Estimating Housing Demand with an Application to Explaining Racial Segregation in Cities,” Journal of Business and Economic Statistics 23 (2005), 20-33. Heckman, James J., Rosa L. Matzkin, and Lars Nesheim, “Nonparametric Identification and Estimation of Nonadditive Hedonic Models,” Econometrica 78 (2010), 1569-1591. Bayer, Patrick, Robert McMillan, Alvin Murphy, and Christopher Timmins, “A Dynamic Model of Demand for Houses and Neighborhoods,” Econometrica, forthcoming, http://www.public.asu.edu/~amurph10/bmmt.pdf.http://www.public.asu.edu/~amurph10/bmmt.pdf. Leonardo Bonilla, Esteban Lopez, and Daniel McMillen. House Prices and School Choice: Evidence from Chicago's Magnet Schools Proximity Lottery. Jan 2016. McMillen Daniel. Airport Expansions and Property Values: the Case of Chicago O'Hare Airport. Journal of Urban Economics 55 (2004):627-640.	Lecturer DM
Week 8 Mar 7-11	Transportation network and spatial organization − Transportation network − Distributional impact Readings: Redding and Turner (2015), Transportation Costs and the Spatial Organization of Economic Activity. Handbook5 Hornbeck and Donaldson (2015), Railroads and American Economic Growth: a "Market Access" Approach. QJE forthcoming Ghani and Kerr (2015), “Highway to Success: The Impact of the Golden Quadrilateral Project for the Location and Performance of Indian Manufacturing” The Economic Journal. doi: 10.1111/ecoj.12207	Lecturer DM
Week 9 Mar 14-18	Spatial equilibrium between cities Spatial equilibrium and size distribution of cities Compensating land-rent differential A two-sector structural model of a city Estimating urban elasticity: endogenous vs exogenous variables Readings: Roback, J. (1982). Wages, Rents, and the Quality of Life. Journal of Political Economy, 90(6), 1257-1278. Glaeser, E. L., & Gottlieb, J. D. (2009). The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States. Journal of Economic Literature, 47, 983–1028. Zheng, S; Fu, Y. & Liu, H. 2008 “Demand for Urban Quality of Living in China: Evidence from Cross-City Land Rent Growth.” Journal of Real Estate Finance and Economics Fu, Y., S. Zheng, and H. Liu (2013), “Structural Estimates of Housing Supply Elasticity across Chinese Cities.” Working paper, National University of Singapore. Albouy, D. (2009), “What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values.” NBER Working Paper No. 14981	Lecturer FYM
Week 10 Mar 21-25	Spatial equilibrium and welfare What determine the allocation of labor and skills across cities? How does spatial allocation of resources affect welfare? Readings: Albouy, D., & Hanson, A. (2014). Tax Benefits to Housing and Inefficiencies in Location and Consumption. NBER Working Paper 19815 Desmet, K., & Rossi-Hansberg, E. (2013). Urban Accounting and Welfare. American Economic Review, 103(6), 2296–2327. Kline, P., & Moretti, E. (2013). People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs. NBER Working Paper No. 19659. Yoon, Chamna (2013). “The Decline of the Rust Belt: A Dynamic Spatial Equilibrium Analysis”	Lecturer FYM
Week 11 Mar 28- Apr 1	Neighbourhood and Network Effects − Social interactions and spatial equilibrium Readings: Topa, G., & Zenou, Y. (2015). Neighborhood and Network Effects. Handbook5	Lecturer DM
Week 12 Apr 4-8	Urbanization and economic development How does economic development and urbanization affect each other? What determine urbanization level? How to model urbanization and development? Readings: Xie, D. (2008). "Technological Progress and the Urbanization Process_." The B.E. Journal of Macroeconomics 8(1): Article 16. Lucas, R. E. (2004). "Life earnings and rural-urban migration." Journal of Political Economy 112(1): S29-S59. Lucas, R. E., Jr. (2009). "Trade and the Diffusion of the Industrial Revolution." American Economic Journal: Macroeconomics 1(1) Henderson, Vernon J. 2003 "The Urbanization Process and Economic Growth: The So-What Question." Journal of Economic Growth 8(1), pp. 47-71. Glaeser, E. L. (2013). A World of Cities: The Causes & Consequences of Urbanization in Poorer Countries. NBER Working Paper No. 19745	Lecturer FYM
Week 13 Apr 11-15	Guest speakers & Discussions about your research Guest lecture by Dr Cristian Badarinza Guest lecture by Dr Fan Yi Discussions on research ideas Readings:	Lecturer QY
Week 14, Apri 18-22	Reading week. Take-home exam paper on April 19.

Assessment

TopClass participation and assignments 50%
A take-home exam 50%