Urban Economics

Introductory Lecture

Model of a Rural Region

Inputs. Labor and land Two goods. Wheat and cloth Equal productivity No scale economies in production.

Constant Returns to Scale Travel by foot.

Implications

Every household will produce is own wheat and cloth

Factory production would be more expensive than home production because of travel costs.

Population uniformly distributed. No cities

Percent of U.S. Population Living in Urban Areas, 1800-1990

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

1750 1800 1850 1900 1950 2000

Percent of U.S. Population Living in Urban Areas

Metropolitan vs Nonmetropolitan Population

0

50000

100000

150000

200000

250000

1980 1990 1998

Metropolitan

Nonmetropolitan

Why Cities?

Comparative advantage, trade and economies of scale in transportation

Economies of scale in production Agglomeration Economies

– Localization Economies– Urbanization Economies

Other reasons?

Urban Economics

“Urban economics is the study of the location choices of firms and

households and of the consequences of those decisions.”

Adapted from O’Sullivan, p.2. Added text in red.

Census 2000 Urban Facts Pop Quiz What is the fastest growing metropolitan

statistical area? What is the largest consolidated

metropolitan statistical area? What is the second largest consolidated

metropolitan statistical area? What is the ten biggest cities in the

United States?