Penn IUR Publications

Document Type

Journal Article

Date of this Version

April 2005

Comments

Copyright The University of Chicago Press. Reprinted from Journal of Political Economy, Volume 113, Number 2, April 2005, pages 345-375.

Subject(s)

Economics, Economic Development and Real Estate, Housing and Community Development

Abstract

Urban decline is not the mirror image of growth, and durable housing is the primary reason the nature of decline is so different. This paper presents a model of urban decline with durable housing and verifies these implications of the model: (1) city growth rates are skewed so that cities grow more quickly than they decline; (2) urban decline is highly persistent; (3) positive shocks increase population more than they increase housing prices; (4) negative shocks decrease housing prices more than they decrease population; (5) if housing prices are below construction costs, then the city declines; and (6) the combination of cheap housing and weak labor demand attracts individuals with low levels of human capital to declining cities.

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Date Posted: 06 July 2006

This document has been peer reviewed.