Urban Decline and Durable Housing
Document Type Journal Article
Copyright The University of Chicago Press. Reprinted from Journal of Political Economy, Volume 113, Number 2, April 2005, pages 345-375.
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.
Date Posted: 06 July 2006
This document has been peer reviewed.