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Urban economics is broadly the economic study of urban areas; as such, it involves using the tools of economics to analyze urban issues such as crime, education, public transit, housing, and local government finance. More specifically, it is a branch of microeconomics that studies urban spatial structure and the location of households and firms ( Quigley 2008 ).
Much urban economic analysis relies on a particular model of urban spatial structure, the monocentric city model pioneered in the 1960s by William Alonso, Richard Muth, and Edwin Mills. While most other forms of neoclassical economics do not account for spatial relationships between individuals and organizations, urban economics focuses on these spatial relationships to understand the economic motivations underlying the formation, functioning, and development of cities.
Since its formulation in 1964, Alonso's monocentric city model of a disc-shaped Central Business District (CBD) and the surrounding residential region has served as a starting point for urban economic analysis. Monocentricity has weakened over time because of changes in technology, particularly, faster and cheaper transportation (which makes it possible for commuters to live farther from their jobs in the CBD) and communications (which allow back-office operations to move out of the CBD).
Additionally, recent research has sought to explain the polycentricity described in Joel Garreau's Edge City. Several explanations for polycentric expansion have been proposed and summarized in models that account for factors such as utility gains from lower average land rents and increasing (or constant returns) due to economies of agglomeration ( Strange 2008 ).
Urban economics is rooted in the location theories of von Thünen, Alonso, Christaller, and Lösch that began the process of spatial economic analysis ( Capello & Nijkamp 2004 :3–4). Economics is the study of the allocation of scarce resources, and as all economic phenomena take place within a geographical space, urban economics focuses on the allocation of resources across space in relation to urban areas ( Arnott & McMillen 2006 :7)( McCann 2001 :1). Other branches of economics ignore the spatial aspects of decision making but urban economics focuses not only on the location decisions of firms but also of cities themselves as cities themselves represent centers of economic activity ( O'Sullivan 2003 :1).
Many spatial economic topics can be analyzed within either an urban or regional economics framework as some economic phenomena primarily affect localized urban areas while others are felt over much larger regional areas ( McCann 2001 :3). Arthur O'Sullivan believes urban economics is divided into six related themes: market forces in the development of cities, land use within cities, urban transportation, urban problems and public policy, housing and public policy, and local government expenditures and taxes. ( O'Sullivan 2003 :13–14).
Market forces in the development of cities relate to how the location decision of firms and households causes the development of cities. The nature and behavior of markets depend somewhat on their locations therefore market performance partly depends on geography.( McCann 2001 :1). If a firm locates in a geographically isolated region, its market performance will be different than a firm located in a concentrated region. The location decisions of both firms and households create cities that differ in size and economic structure. When industries cluster, like in Silicon Valley in California, they create urban areas with dominant firms and distinct economies.
By looking at location decisions of firms and households, the urban economist is able to address why cities develop where they do, why some cities are large and others small, what causes economic growth and decline, and how local governments affect urban growth ( O'Sullivan 2003 :14). Because urban economics is concerned with asking questions about the nature and workings of the economy of a city, models and techniques developed within the field are primarily designed to analyze phenomena that are confined within the limits of a single city ( McCann 2001 :2).
Looking at land use within metropolitan areas, the urban economist seeks to analyze the spatial organization of activities within cities. In attempts to explain observed patterns of land use, the urban economist examines the intra-city location choices of firms and households. Considering the spatial organization of activities within cities, urban economics addresses questions in terms of what determines the price of land and why those prices vary across space, the economic forces that caused the spread of employment from the central core of cities outward, identifying land-use controls, such as zoning, and interpreting how such controls affect the urban economy ( O'Sullivan 2003 :14).
Economic policy is often implemented at the urban level thus economic policy is often tied to urban policy ( McCann 2001 :3). Urban problems and public policy tie into urban economics as the theme relates urban problems, such as poverty or crime, to economics by seeking to answer questions with economic guidance. For example, does the tendency for the poor to live close to one another make them even poorer? ( O'Sullivan 2003 :15).
Urban transportation is a theme of urban economics because it affects land-use patterns as transportation affects the relative accessibility of different sites. Issues that tie urban transportation to urban economics include the deficit that most transit authorities have and efficiency questions about proposed transportation developments such as light-rail ( O'Sullivan 2003 :14). Megaprojects such as this have been shown to be synonymous with unexpected costs and questionable benefits.
Housing and public policy relate to urban economics as housing is a unique type of commodity. Because housing is immobile, when a household chooses a dwelling, it is also choosing a location. Urban economists analyze the location choices of households in conjunction with the market effects of housing policies ( O'Sullivan 2003 :15). In analyzing housing policies, we make use of market structures e.g., perfect market structure. There are however problems encountered in making this analysis such as funding, uncertainty, space, etc.
The final theme of local government expenditures and taxes relates to urban economics as it analyzes the efficiency of the fragmented local governments presiding in metropolitan areas ( O'Sullivan 2003 :15).
Regional science is a field of the social sciences concerned with analytical approaches to problems that are specifically urban, rural, or regional. Topics in regional science include, but are not limited to location theory or spatial economics, location modeling, transportation, migration analysis, land use and urban development, interindustry analysis, environmental and ecological analysis, resource management, urban and regional policy analysis, geographical information systems, and spatial data analysis. In the broadest sense, any social science analysis that has a spatial dimension is embraced by regional scientists.
Economic geography is the subfield of human geography which studies economic activity and factors affecting them. It can also be considered a subfield or method in economics. There are four branches of economic geography. There is, primary sector, Secondary sector, Tertiary sector, & Quaternary sector.
In general, a rural area or a countryside is a geographic area that is located outside towns and cities. The Health Resources and Services Administration of the United States Department of Health and Human Services defines the word rural as encompassing "...all population, housing, and territory not included within an urban area. Whatever is not urban is considered rural." Typical rural areas have a low population density and small settlements. Agricultural areas and areas with forestry typically are described as rural. Different countries have varying definitions of rural for statistical and administrative purposes.
Economies of agglomeration or agglomeration effects are cost savings arising from urban agglomeration, a major topic of urban economics. One aspect of agglomeration is that firms are often located near to each other. This concept relates to the idea of economies of scale and network effects.
Edge city is a term that originated in the United States for a concentration of business, shopping, and entertainment outside a traditional downtown or central business district, in what had previously been a suburban residential or rural area. The term was popularized by the 1991 book Edge City: Life on the New Frontier by Joel Garreau, who established its current meaning while working as a reporter for The Washington Post. Garreau argues that the edge city has become the standard form of urban growth worldwide, representing a 20th-century urban form unlike that of the 19th-century central downtown. Other terms for these areas include suburban activity centers, megacenters, and suburban business districts. These districts have now developed in many countries.
Urban sprawl is the unrestricted growth in many urban areas of housing, commercial development, and roads over large expanses of land, with little concern for urban planning. In addition to describing a special form of urbanization, the term also relates to the social and environmental consequences associated with this development. Since the advent of the industrial era, sprawl has entailed no direct disadvantages, such as the loss of protection from medieval city walls. However, its disadvantages and costs include increased travel time, transport costs, pollution, and destruction of countryside. The cost of building the infrastructure needed for new developments is hardly ever recouped through property taxes, amounting to a huge subsidy for the developers and new residents at the expense of existing property taxpayers. In Continental Europe, the term peri-urbanisation is often used to denote similar dynamics and phenomena, but the term urban sprawl is currently being used by the European Environment Agency. There is widespread disagreement about what constitutes sprawl and how to quantify it. For example, some commentators measure sprawl only with the average number of residential units per acre in a given area, but others associate it with decentralization, discontinuity, segregation of uses, and so forth.
Land-use forecasting undertakes to project the distribution and intensity of trip generating activities in the urban area. In practice, land-use models are demand-driven, using as inputs the aggregate information on growth produced by an aggregate economic forecasting activity. Land-use estimates are inputs to the transportation planning process.
Masahisa Fujita is a Japanese economist who has studied regional science and Urban economics and International Trade, Spatial Economy. He is a professor at Konan University and an adjunct professor at Institute of Economic Research, Kyoto University.
Articles in economics journals are usually classified according to JEL classification codes, which derive from the Journal of Economic Literature. The JEL is published quarterly by the American Economic Association (AEA) and contains survey articles and information on recently published books and dissertations. The AEA maintains EconLit, a searchable data base of citations for articles, books, reviews, dissertations, and working papers classified by JEL codes for the years from 1969. A recent addition to EconLit is indexing of economics-journal articles from 1886 to 1968 parallel to the print series Index of Economic Articles.
Affordable housing is housing which is deemed affordable to those with a household income at or below the median as rated by the national government or a local government by a recognized housing affordability index. Most of the literature on affordable housing refers to mortgages and a number of forms that exist along a continuum – from emergency homeless shelters, to transitional housing, to non-market rental, to formal and informal rental, indigenous housing, and ending with affordable home ownership.
The German Institute for Economic Research or more commonly DIW Berlin is a economic research institute in Germany, involved in basic research and policy advice. It is a non-profit academic institution, financed with public grants from the Berlin Senate Department for Economics, Technology and Research and the Federal Department for Economics and Technology. DIW Berlin was founded in 1925 as the Institute for Business Cycle Research and was later renamed.
Economic restructuring is used to indicate changes in the constituent parts of an economy in a very general sense. In the western world, it is usually used to refer to the phenomenon of urban areas shifting from a manufacturing to a service sector economic base. It has profound implications for productive capacities and competitiveness of cities and regions. This transformation has affected demographics including income distribution, employment, and social hierarchy; institutional arrangements including the growth of the corporate complex, specialized producer services, capital mobility, informal economy, nonstandard work, and public outlays; as well as geographic spacing including the rise of world cities, spatial mismatch, and metropolitan growth differentials.
Rural economics is the study of rural economies, including:
UrbanSim is an open source urban simulation system designed by Paul Waddell of the University of California, Berkeley and developed with numerous collaborators to support metropolitan land use, transportation, and environmental planning. It has been distributed on the web since 1998, with regular revisions and updates, from www.urbansim.org. Synthicity Inc coordinates the development of UrbanSim and provides professional services to support its application. The development of UrbanSim has been funded by several grants from the National Science Foundation, the U.S. Environmental Protection Agency, the Federal Highway Administration, as well as support from states, metropolitan planning agencies and research councils in Europe and South Africa. Reviews of UrbanSim and comparison to other urban modeling platforms may be found in references.
The social sciences are the sciences concerned with societies, human behaviour, and social relationships.
Concentrated poverty concerns the spatial distribution of socio-economic deprivation, specifically focusing on the density of poor populations. Within the United States, common usage of the term concentrated poverty is observed in the fields of policy and scholarship referencing areas of "extreme" or "high-poverty." These are defined by the US census as areas where "40 percent of the tract population [lives] below the federal poverty threshold." A large body of literature argues that areas of concentrated poverty place additional burdens on poor families residing within them, burdens beyond what these families' individual circumstances would dictate. Research also indicates that areas of concentrated poverty can have effects beyond the neighborhood in question, affecting surrounding neighborhoods not classified as "high-poverty" and subsequently limiting their overall economic potential and social cohesion. Concentrated poverty is a global phenomenon, with prominent examples world-wide. Despite differing definitions, contributing factors, and overall effects, global concentrated poverty retains its central theme of spatial density. Multiple programs have attempted to ameliorate concentrated poverty and its effects within the United States, with varying degrees of progress and to sometimes detrimental effect.
Luc-Normand Tellier is a Professor Emeritus in spatial economics of the University of Quebec at Montreal.
This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.
John Forrest Kain was an American empirical economist and college professor. He is notable for first hypothesising spatial mismatch theory, whereby he argued that there are insufficient job opportunities in low-income household areas. Kain is also notable for his focus on subordination and transport economics. As well as his research, he is also known for his long career of teaching at Harvard University and the University of Texas at Dallas, as well as founding the Texas Schools Project.
Yves Zenou is a French-Swedish economist. He is a Professor at Monash University and holds the Richard Snape Chair in Business and Economics.