Suburbs and Cities

This paper addresses the issue of how closely the fortunes of suburbs are tied to the fortunes of the central city. We use similarities in residential housing price dynamics as a measure of how closely the economies of cities and suburbs are related. We develop housing price indices for most of the zip codes in California, and use these in a clustering procedure to see whether cities and suburbs naturally aggregate together, or whether they move separately. We find that central cities tend to aggregate with their suburbs suggesting that the fortunes of the cities and suburbs are closely linked. We find evidence of a two-tiered structure to suburbs. While nearby suburbs continue to group with their metropolitan core, extended suburban economies comprised mostly of affluent neighborhoods, may be "drifting away" from the central cities.