ECON 325 Urban Economics Final Study Guide PDF

ECON 325: URBAN ECONOMICS FINAL REVIEW GUIDE Advantages and disadvantages of public transportation; limitations to increasing public transit use in the US. - Advantages - more efficient - safer than car traffic - May be cheaper than owning a car Reduces t...

ECON 325: URBAN ECONOMICS FINAL REVIEW GUIDE Advantages and disadvantages of public transportation; limitations to increasing public transit use in the US. - Advantages - more efficient - safer than car traffic - May be cheaper than owning a car Reduces traffic on the road Less car accidents - more environmentally friendly - Can take cars off the road - Higher density leads to less trips, more mode choices, less dwelling units, and less energy required for heating/cooling, and less destruction of natural environment - Public transit generates less CO2 per-person than car transport. - Easier to electrify (make green) - Can easily be electrified and cars generate a lot of noise - Disadvantages - less comfortable - less flexible - can be more time consuming depending on destination/quality - Limited coverage of areas. - Maintenance and upkeep - reliance on public funding. - Limitations - Geography (terrain and distance) - Car centric culture in US - Urban Sprawl - Built environment, unreasonably high infrastructure costs - efficient public transit requires PPSM > 10K; only 12% live in tract with > 10K PPSM - infrastructure costs are exorbitant in the US - Possible aging of infrastructure - because of high car ownership, transit investments often coded as redistribution Auto-centric land use patterns and their consequences; possible solutions to traffic congestion and high vehicle fatality rates. - Patterns - Designing features and policies for easy driving and walkability - Centralization of non-residential uses, less densities - Density-congestion relationship: In theory, low density = low congestion - Lower densities -> fewer modes of transport. - massive conversion to road and park capacity - road limit highways + have less speed and more complexity - interstates have more speeds with less complexity - Consequences  - Increased traffic congestion - urban sprawl - expansion of urban developments on undeveloped land near a more or less densely populated city, of ten without planning - Environmental degradation - externality of congestion and public health. - Higher fatality rate from cars (death) - Increased speeds increase fatality of crashes. - Exacerbated by vehicle weight/size - Density decreases likelihood of fatal crashes because people are not driving as fast/far. - Possible solutions to traffic congestion and high vehicle fatality rates. - Less congestion leads to more speed. - “Congestion pricing” - tax and regulation, and urban planning - Drivers tend to drive at a rate that feels safe. - Depends on lane width, # of lanes, presence of clear roads. - Speeds can be decreased by redesign of road. - Road diets decrease speed and create space for others - Roundabouts replace signalized/stop-signed intersections with free flowing circular traffic. - Decreases speed but increases traffic flow. - Can decrease crashes - Improved public transportation - Reduce dependency on cars Definitions and intuition for the concept of gentrification; distinguishing succession from displacement empirically; upsides and downsides; possible winners and losers. - Definitions - Process by which low income neighborhoods become higher income status, leading to rising property values and rents - Higher out-migration rate - intuitions - Low-status neighborhoods become higher status neighborhoods - status = income, education, housing prices/rent - mostly determined by changes in in-movers - example - College people don't have wealth but have income and education so they buy houses with lower prices. - Preference for urban amenities: young people want to be closer to bars, restaurants, clubs - distinguishing succession from displacement empirically; - Succession - Normal out migration rate, where the residents gets replaced by a higher income household  - Natural turnover of residents - people move out a lot, but should have similar demographic - Displacement - Higher income "in movers" drive up rents/overall prices, which leads to lower income renters being priced out - when original residents are forced to leave due to rising costs - Forces incumbents out. - Little evidence of displacement w/ gentrification. - Impacts of gentrification - Evidence that it creates areas more desirable for educated, black households - Rents overall increase but gentrification had less effect on reported rents for less-educated incumbents - upsides and downsides; possible winners and losers. - Upsides - better amenities - local government pays more attention leading to higher investment - businesses drawn to areas they can make more money - housing wealth (values of homes increases) - more integration (reduction in segregation) - decrease in crime and better policing - Downsides - Increases housing prices for in-movers - Displacement of low-income renters (existing residents) - Improvements for wrong reasons - highlights issues w racism as seen in reading - substantial racial transition is also not associated with gentrification. - winners/losers - Winners - New residents and property owners - Business moving in to the area - White, educated households and kids - Kids: Less exposure to poverty, more exposure to college grads, more neighborhood employment rates - Losers - renters who are displaced, long term residents - displacement of poorer people, particularly poor renteres - Less educated renters Factors influencing the general rise and fall of segregation in the US, including the Great Migration, formal/informal means by which segregation was promoted, and how those means have evolved over the past century. (You don’t need to memorize the formulas for measuring segregation.) - Factors (rise) - Great Migration and Segregation  - “Migration of Blacks to the North from the South” - large scale movement of African Americans from rural south to urban areas in the north, midwest, and west 1916-1970 - over 6 million African-Americans leave the South. - Whites threatened by influx of Southern Black migrants. Black migrants isolated in ghettos - formal segregation laws (Jim Crow) - Redlining - Informal practices like restrictive covenants (later deemed unenforceable by supreme court) - Deed restrictions on race, religion, etc. → until 1948 - Racial Zoning (in the South) - Push factors of migration - Racial steering: sharecropping + tenant farming - By real estate agents - Economic oppression - Violence: lynchings, Jim Crow, KKK - firebombing, assaults, house bombing - Living conditions: lack of infrastructure, access to education and health care - Pull factors of migration - industry jobs, city amenities, social networks - White flight - 2 main phases: pre-war intra city migration and postwar white flight to suburbs - Prior to 50s, strong intra-city migration - Highway construction lead to suburbanization - Each AA migrant associated w 2.7 white departures - Anant's study of segregation - Segregation increased bw race inequality. Higher poverty rate for AA. Heterogeneity in group pref can impact public good provision. Increased racial fractionalization leads to less spending. Negative relationship bw diversity and spending on ed, welfare, roads - Fall of segregation (Formal and informal) - Many things promoting segregation became illegal, contributing to its downfall. - People became more tolerant and mixed together over time. - Shelley v. Kramer decision - Racial covenants against the 14th amendment equal protection clause - not illegal, but states couldn't enforce them anymore Civil rights movement - Formal/informal means - Informal means of segregation - Violence (important): most common form of enforcement - Discrimination by realtors/sellers (important): - Formal means of segregation - Racial zoning (not important) - Racial covenants (unclear)  - covenants not illegal but race-based enforcement involves state action, violating 14A - HOLC - buy + refinance distressed mortgages from banks. - Direct discrimination played less role in map making. - AA already forced out -> decreased housing quality. - Maps codified existing discriminatory reality. - Redlining - systematic practice of discrimination by realtors/insurers OR colored red in HOLC maps. - FHA - lending practices, Blacks being denied mortgages - insure new mortgages. FHA lending targeted new-construction, higher income areas. - Excluded low income, urban neighborhoods where AAs resided. - Consistent w discriminatory practices by private lenders. - Most redlining done by banks/realtors, FHA contributed significant by keeping AA out - How have segregation-promoting means evolved over the past century? - Shift from overt legal measures to more subtle forms like economic zoning and unequal access to resources - Suburbanization and white flight - Steering - School segregation - Real estate agents, racial steering (names in emails denied housing) Using the Becker model to understand the risk/reward tradeoff for crime; using the model to illustrate how city characteristics can influence crime rates; limitations of the model. - Definition - Analyzes the reward from commiting a crime with the risk when making a criminal decision. - Becker model shows the risk/reward tradeoff for committing crimes - based on potential gains and likelihood of punishment (crime attractors and deterrents) - Crime generators - encourages crimes that otherwise wouldn't happen, like bars and train stations - Crime attractors - attract ppl w criminal intent, like bars, drug scenes, sex work - Attracting crime on certain streets - Vacancies and empty lots -> less social control, liquor stores, ATM machines, train stations (bc it generates more foot traffic) - Crime deterrents - visible police presence, more businesses, street lights/visibility - In other words  - Criminal activity delivers some net benefit after effort/moral costs. - Suffer higher costs in the event of arrest. - Arrest is probabilistic. - Punishment level is deterministic. - Tradeoff between legal work and crime. - Limitations of Becker Model - Assumes all criminals are rational, and ignores social and psychological factors influencing crime (how often do criminals actually consciously contemplate economic trade offs?) - People don't always behave rationally like crimes of passion - People sometimes are not rational at all, like people on meth - Different individuals weigh pros and cons differently - Don't know price or cost in practice and don't know the tradeoff of the two - Does Not consider certain social factors, like discrimination, poverty, inequality - Measurement error - Probability of being caught - Characteristics - Pop density, economic opportunities, and law enforcement affect the tradeoff Overall trends in crime across US cities and the factors that probably were or were not that influential. - Trends in crime across US cities - Decline in violent and property crimes since the 1990s, with variations across cities - Violent: Homicide, Robbery, Assault, Property crime - Crime trends: - Influential - change in level/sophistication of policing - - technology (ShotSpotter) - private investment in security+pub space - lead abatement - Somewhat influential - mass incarceration - Not influential - Labor markets - gun control - Roe v. Wade (Supreme Court case that established a constitutional right to abortion) - Immigration - Demographic change - 550 rule - Cities with more neighborhoods w/ concentrated disadvantages increase crime. 550 rule: 5% of locations for 50% of crime Causes of variation in crime both within and across cities; routine activities theory and how it relates to patterns of crime within neighborhoods. - Causes (within) - Crime is concentrated in the most disadvantaged neighborhoods - Socioeconomic disparities - Hot Spots Phenomenon: High levels of crime concentrated in specific areas of a city - Causes (across) - Predicted by demographics, particularly poverty, education, inequality, and segregation - Quality/level of policing varies across cities - Engagement of community with police, - infrastructure - Land use patterns - Routine activity theory - Definition - Crime volume relates to everyday interaction patterns. - Convergence in space and time of likely offenders, suitable targets, absence of capable guardians - Eyes on street: commercial uses have more densities which leads to more street activity and decreases crime. - Less dense areas are less safe bc they have crime attractors. - Addressing hotspots: Problem oriented police programs: community driven, proactive, place-based response - How it relates to patterns of crime within neighborhoods - More commercial uses, higher densities ⇒ more street activity ⇒ less crime - Neighborhoods with more crime generator and attractors (like late-night restaurants/bars) will attract more suitable targets and likely offenders to the area Using the Roback model to illustrate graphically why cities that differ in terms of productivity and amenities may have different wage and price combinations in equilibrium. (You do not need to memorize the equations leading to the different indifference curves, but you should understand what the lines you’re graphing actually represent.) - Graphical illustration - Larger cities tend to pay better. - Quality of life and productivity affect prices and wages, which in turn affect each other - Thus, the increased productivity that comes with bigger city sizes leads to increased prices and wages. - What does the Roback model explain about cities? - Differences in productivity and amenities lead to variations in wage and price combinations in equilibrium - What do the lines on the Roback model graph represent and what does this graph generally look like? - they represent indifference curves, showing tradeoffs between wages and housing costs for individuals  - housing price on y axis, labor income on x, upward sloping utility curve, downward sloping indifference curve Explanations for the city size wage premium. - What explains the city size wage premium? - higher productivity, better job matching, and knowledge spillovers in larger cities. - By city sizes - Bigger cities tend to pay more, but more expensive, more pay offsets higher prices. - Large cost of living, real wage varies, more amenities - Monocentric city: price adjusts to equilibrate utility across locations - Labor market concentration (monopsony) decreases wages. - Human capital spillover; diverse labor market - Larger cities have more competition and less monopsony - Agglomeration economies Major determinants of city location; role of locational fundamentals and increasing returns in determining growth. - Major determinants of city location - Geographical features (Land, River, and Ports) - Trade routes - Cultural and Religious significance - role of locational fundamentals and increasing returns in determining growth. - Locational fundamentals (LF) like natural resources and infrastructure, and increasing returns to scale - Types - First Nature - actual nature, why settlement may be more desirable. - Water for ports, value of land for agriculture, climate, strategic locations, natural amenities, natural resources - Second Nature - ppl show up and change place that makes it more desirable. Infrastructure, durable capital, institutions, anchor employer - city growth in accordance w/ value of location. - Value determined by things like trade routes, ports, natural amenities, etc. - Less value -> less population. - Implies mean reversion in response to negative shocks - Increasing Returns - 2 regions, 2 sectors, positive trade cost for manufactur goods, manufacturing sjt monopolistic competition, consumers love variety. - 2 sectors: agriculture (CRS, immobile labor), manufacturing (IRS, mobile labor). - Suppose 1 region starts w/ more share of manufacturing. - More local goods available so price index decreases. - Increases in-migration and firms + can lead to regional divergences Impacts of major physical and economic shocks on urban growth; how LF, IR, and RG differ in their predictions for cities’ responses to shocks. - How do major shocks affect urban growth? - Physical and economic shocks influence population, infrastructure, and economic activity differently - Land demarcation regimes: metes + bounds (MB) and Rectangle system (RS). MB more flexible, RS more precise. - In areas where MB can't do better (flat land), RS does better. Med lvl ruggedness, increase land value in RS area. - Disputes more common w/ MB, more interaction w legal system -> not good + easier to est what you own which is less costly. - RS easier to build up - How do LF, IR, and RG predict responses to shocks? - LF (Locational Fundamentals) - focuses on inherent geographic advantages = response to schock is mean reversion - positive shock should be persistent. - If there's more ppl than there should be, ppl will spread out. - Ex: Cubans in Miami. LR: mean reversion when fundamentals strong, decrease when fund lose value. - IR (Increasing Returns) - emphasizes agglomeration effects - gives more of LF story. - Multiple equilibria. persistent despite less in value of fund, multiple equilibria, ambiguous shock effect. - RG (Random Growth) - Attributes growth to chance events and path dependence = response to shock is no mean reversion - can explain why city population tend to follow power law. RG shocks may have permanent effects. No mean reversion expected. - ays shock should be permanent or should have permanent impact. avg grt independent of size; variance as well - implies no mean aversion and reaction to increase. - 3 econ theories summed up - LF explains location choice. - IR can explain why some places grow and others do not. - RG mainly about growth not initial choice. Water matters most!!! Port sites generate interactions + commerce CASE EXAMPLE ETC - Division + reunification of Germany in WWII and Cold War - Border cities saw decline in population after division. Did not reverse after reunification. Market access impact. - Panama Canal  - Market access impact. Significant increase in land value, population, wages. Ex of LF. - Napoleonic War - Decrease in market access for northern France -> imported cotton declines -> France increases mechanized spinning capacity -> Output + productivity persists after war -> France becomes large exporter of cotton. - Consistent w/ IR: temporary shocks can have permanent impact - US Civil War - Britain's textile industry suffered. Highly agglomerated: industry accounted for a big portion of employment. - Shock induced long run change in level but not growth rate of cities. Consistent w/ RG: temporary econ shock have permanent impact