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Who gets the urban surplus?

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  • Venables, Anthony
  • Collier, Paul

Abstract

High productivity in cities creates an economic surplus relative to other areas. How is this divided between workers and land-owners? Simple models with homogenous labour suggest that it accrues largely – or entirely – in the form of land-rents. This paper shows that heterogeneity of labour in two main dimensions (productivity differentials and housing demands) radically changes this result. Even a modest amount of heterogeneity can drive the land share of surplus down to 2/3rds or lower, as high productivity and/or low housing demand individuals receive large utility gains. In a system of cities the sorting of workers across cities mean that the land-rent share of surplus is lowest in the largest and most productive cities.

Suggested Citation

  • Venables, Anthony & Collier, Paul, 2017. "Who gets the urban surplus?," CEPR Discussion Papers 12001, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12001
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    References listed on IDEAS

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    1. Kristian Behrens & Gilles Duranton & Frédéric Robert-Nicoud, 2014. "Productive Cities: Sorting, Selection, and Agglomeration," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 507-553.
    2. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 983-1028, December.
    3. David Albouy, 2016. "What Are Cities Worth? Land Rents, Local Productivity, and the Total Value of Amenities," The Review of Economics and Statistics, MIT Press, vol. 98(3), pages 477-487, July.
    4. Richard J. Arnott & Joseph E. Stiglitz, 1979. "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(4), pages 471-500.
    5. Gilles Duranton & J. V. Henderson & William C. Strange (ed.), 2015. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 5, number 5.
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    Cited by:

    1. Awasthi, Rajul & Nagarajan, Mohan & Deininger, Klaus W., 2021. "Property taxation in India: Issues impacting revenue performance and suggestions for reform," Land Use Policy, Elsevier, vol. 110(C).
    2. Ginés de Rus & Javier Campos & Daniel Graham & M. Pilar Socorro & Jorge Valido, 2020. "Evaluación Económica de Proyectos y Políticas de Transporte: Metodología y Aplicaciones. Parte 1: Metodología para el análisis coste-beneficio de proyectos y políticas de transporte," Working Papers 2020-11, FEDEA.
    3. Ginés de Rus & M. Pilar Socorro & Jorge Valido & Javier Campos, 2023. "Cost–Benefit Analysis of Transport Projects: Theoretical Framework and Practical Rules," Springer Books, in: Economic Evaluation of Transport Projects, chapter 0, pages 11-42, Springer.
    4. Anping Chen & Tianshi Dai & Mark D. Partridge, 2021. "Agglomeration and firm wage inequality: Evidence from China," Journal of Regional Science, Wiley Blackwell, vol. 61(2), pages 352-386, March.
    5. Nygaard, Christian & Parkinson, Sharon & reynolds, margaret, 2021. "Agglomeration effects and housing market dynamics," SocArXiv k9tcx, Center for Open Science.

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    More about this item

    Keywords

    Land rent; Cities; Productivity; Wages; Sorting;
    All these keywords.

    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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