Introduction to Urban Economics

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Introduction to Urban Economics

January 25, 2015


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What can you say of the urban planning of Tacloban City?

How about comparing the urban design of Makati andTacloban?

What do you observe of the rural and urban settlement?The residential and industrial setting in an area?

How about traffic congestion in Metro Manila versusBaybay?


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Describe the city/urban planning of these cities: Tacloban City

Baybay City

Catbalogan City

Cebu City Iloilo City

How does urban planning change overtime?

Discuss the history of urban economics.

Give an example of city and explain.


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Why are people willing to live in dirty,noisy crowded

cities?


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Urban economics started not

from town planning or industrialbreakthrough---but from trafficcongestion. (problems on the riseof car ownership)

What is the role of transportation

system in urban planning?

Initially, urban economics explainsusing economic analysis thedetermination of patterns oflocation given the transport

system and to predict the effectson the pattern of land-use


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Urban economics to put simply is just the study of thecitytown planning and land or real estate managementand to analyse government policies in dealing with urbanproblems


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Land-use

Can we induce people to move? Tottenham said, Planning means

control- get people out and tell themwhere to live..

But planners, changed their view:

Responses: Demand for greater powers, powers

of positive and negative planning

To find out why planning controlswere circumvented

To find out using economic analysiswhat the secondary effects ofplanning controls would be


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Primary contribution of Urban Economics

An understanding of the ways of how an urban economicsystem interact (study of positive economics)

An analysis of what planners ought to do (normativeurban economics)

The analysis of what planners do and the reasons whythey do what they do (Economics of town planning)

WHY DO CITIES EXIST?


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Why Do Cities Exist?


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Why do citiesexist? Whatdetermines thelocation, size, shapeand growth ofcities?

Well explain itby studyingutility-maximizinghouseholds andprofit-maximizingfirms

Land use, industryclusters and population

distribution Urban Problems: Crime,

Education,Transportation, Housing

Cities...

.....facilitate growth

..... exist because benefits(innovation, production and

trade) exceed costs (cities are

noisy, dirty and crowded)


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Who cares?

Businessmen: Where tolocate firms? How big themarket will be?

Real estate investors:

Patterns of land use andpopulation distribution

Policy makers: Policiesthat combat urban

problems will increase thevitality of cities, helpingthem to grow.


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Census block: Smallest geographical unit. Area boundedby streets, property lines, political boundaries, etc.

Urban and Rural areas:

Urbanized Area (UA): Densely settled core of blocks andsurrounding blocks such that pop. density > 1000 people persquare mile & N>50,000

Urbanized Cluster (UC): Small version of urbanized area. Pop.

density > 500 people per square mile & 2,500


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Metro(micro)politan areas (MSA).

Metropolitan area (MeA): Includes at least one urbanized area(UA) such that N>50,000

Micropolitan area (MiA): Includes at least one urbanized cluster(UC) such that 10,000>N>50,000

Principal City

Principal city is the largest place (municipality) in eachMSA. Possibly many principal cities in a given MSA.

Minimum requirements Population size: At least 250,000 people.

Employment size: At least 100,000 workers.


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Economic City: Area with a relatively high populationdensity that contains a set of closely related andeconomically integrated activities (flow of workers,money, etc...).

Political City: Area over which a municipal corporationexercises political authority, providing local governmentservices and collecting taxes.

Using CB definitions central city or municipality where amunicipal corporation exercises political authority and provideslocal services.


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Philippines Urban Population

-5.00

10.00

15.00

20.00

25.0030.00

35.00

40.00

45.00

50.00

Millions

Urban population


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Percentage of urban population in

Philippines

0

0.5

1

1.5

2

2.5

42

43

44

45

46

47

48

49

annual

%

%o

ftotal

Urban population (% of total)

Urban population growth(annual %)


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19701. Tokyo, Japan 16.5

2. New York, United States 16.2

3. Shanghai, China 11.2

4. Osaka, Japan 9.4

5. Mexico City, Mexico 9.1

6. London, England 8.6

7. Paris, France 8.5

8. Buenos Aires, Argentina 8.4

9. Los Angeles, United States 8.4

10. Beijing, China 8.1

2015

1. Tokyo, Japan 37.1

2. Jakarta, Indonesia 26.1

3. Seoul, South Korea 22.5

4. Delhi, India 22.25. Shanghai, China 20.9

6. Manila, Philippines 20.8

7. Karachi, Pakistan 20.7

8. New York, United States 20.5

9. Sao Paulo, Brazil 20.2

10. Mexico City, Mexico 19.5


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Three basic conditions for the existence

of a city

Agricultural surplus

Transportation

Urban Production


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Three facts of life (real

imperfections) that make citiesdesirable

Imperfect factor mobility(impending elimination ofnatural resources advantages).

Imperfect input divisibility(generating scale andagglomeration economies).

Imperfect mobility of good

and services (its better to beclose to producers)


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Three assumptions that make city formation unattractive1. Equal productivity of all land and all workers

2. Constant returns to scale in transport and exchange

3. Constant returns to scale in production


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Three assumptions imply

1. Equal productivity of all land and all workers Everybody would be self-sufficient

2. Constant returns to scale in transport and exchange

Exchange would only cause transport costs, no benefits

3. Constant returns to scale in production No benefits of clustering of production in factories


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FIRST ASSUMPTION Unequal productivity benefits = comparative advantage

What is the best thing to do for North?


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Assume thatSouth switches 2hours from shirtto breadproduction.

Trade in itself causesno cities; families

could exchange

among themselves


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Assumption 2: Economies of scale in exchange

Trading cities

Results of combination of productivity differences and scale

economies in transport Long history (3000 BC)


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Assumption 3: Economies of

scale in production

Sources of scale economiesin production Factor specialisation (Adam

Smith) Indivibisility of inputs

(minimum efficient scale)

If economies of scale in

production exist Concentration, in spite of high

land rents Emergence of a market area

Households buy theproduct from the factoryif:

Factory price, +

Introduction to Urban Economics

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