Working Paper: CEPR ID: DP17014
Authors: Nicolas Coeurdacier; Florian Oswald; Marc Teignier
Abstract: How do cities grow in the process of structural transformation? To answer this question, we develop a multi-sector spatial equilibrium model with endogenous land use: land is used either for agriculture or housing. Urban land, densely populated due to commuting frictions, expands out of agricultural land. With low productivity and high subsistence needs, farmland is expensive, households cannot afford large homes and cities are very dense. Increasing productivity reallocates factors away from agriculture, freeing up land for urban expansion and limiting the increase in land values despite higher income and urban population. With the area of cities growing faster than urban population, urban density can persistently decline, as in the data over a long period. Quantitative predictions of the joint evolution of density and land values across time and space are confronted with historical data assembled for France over 180 years.
Keywords: structural change; land use; productivity growth; urban density
JEL Codes: O41; R14; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rising agricultural productivity (Q11) | reallocation of land use (R14) |
| reallocation of land use (R14) | urban expansion (R11) |
| urban expansion (R11) | declining urban density (R23) |
| commuting costs (R48) | urban density (R11) |
| commuting costs (R48) | land use (R14) |
| urban expansion (R11) | flat urban land values (R33) |