The Economics Approach to Cities

Edward Glaeser

No 13696, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The economic approach to cities relies on a spatial equilibrium for workers, employers and builders. The worker's equilibrium implies that positive attributes in one location, like access to downtown or high wages, are offset by negative attributes, like high housing prices. The employer's equilibrium requires that high wages be offset by a high level of productivity, perhaps due to easy access to customers or suppliers. The search for the sources of productivity differences that can justify high wages is the basis for the study of agglomeration economies which has been a significant branch of urban economics in the past 20 years. The builder's equilibrium condition pushes us to understand the causes of supply differences across space that can explain why some places have abundant construction and low prices while others have little construction and high prices. Since the economic theory of cities emphasizes a search for exogenous causes of endogenous outcomes like local wages, housing prices and city growth, it is unsurprising that the economic empirics on cities have increasingly focused on the quest for exogenous sources of variation. The economic approach to urban policy emphasizes the need to focus on people, rather than places, as the ultimate objects of policy concern and the need for policy to anticipate the mobility of people and firms.

JEL-codes: R0 (search for similar items in EconPapers)
Date: 2007-12
New Economics Papers: this item is included in nep-geo, nep-lab and nep-ure
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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