Finance Papers

Document Type

Journal Article

Date of this Version

4-2005

Publication Source

Journal of Political Economy

Volume

113

Issue

2

Start Page

345

Last Page

375

DOI

10.1086/427465

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.

Copyright/Permission Statement

© 2005 by University of Chicago Press

Embargo Date

4-2006

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Date Posted: 27 November 2017

This document has been peer reviewed.