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Urban Decline and Durable Housing

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  • Edward L. Glaeser
  • Joseph Gyourko

Abstract

People continue to live in many big American cities, because in those cities housing costs less than new construction. While cities may lose their productive edge, their houses remain and population falls only when housing depreciates. This paper presents a simple durable housing model of urban decline with several implications which document: (1) urban growth rates are leptokurtotic -- cities grow more quickly than they decline, (2) city growth rates are highly persistent, especially amount declining cities, (3) positive shocks increase population more than they increase housing prices, (4) negative shocks decrease housing prices more than they decrease population, (5) the relationship between changes in housing prices and changes in population is strongly concave, and (7) declining cities attract individuals with low levels of human capital.

Suggested Citation

  • Edward L. Glaeser & Joseph Gyourko, 2001. "Urban Decline and Durable Housing," NBER Working Papers 8598, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8598
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    References listed on IDEAS

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    1. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
    2. Goodman, John Jr. & Ittner, John B., 1992. "The accuracy of home owners' estimates of house value," Journal of Housing Economics, Elsevier, vol. 2(4), pages 339-357, December.
    3. Edward L. Glaeser & Matthew E. Kahn & Jordan Rappaport, 2000. "Why Do the Poor Live in Cities?," NBER Working Papers 7636, National Bureau of Economic Research, Inc.
    4. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
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    15. Glaeser, Edward L & Gyourko, Joseph & Saks, Raven, 2005. "Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 331-369, October.
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    JEL classification:

    • R - Urban, Rural, Regional, Real Estate, and Transportation Economics

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