Periodic Reporting for period 4 - DYNURBAN (Urban dynamics: learning from integrated models and big data)
Periodo di rendicontazione: 2021-02-01 al 2022-07-31
Urban density boosts productivity and innovation, improves access to goods and services, reduces typical travel distances, encourages energy-efficient construction and transport, and facilitates sharing of scarce amenities. However, density is also synonymous with crowding, makes living and moving in cities more costly, and concentrates exposure to pollution and disease. We explore the appropriate measurement of density and describe how it is both a cause and a consequence of the evolution of cities. We then discuss whether and how policy should target density and why market and political forces unhappily resolve the trade-off between its pros and cons.
A key reason why the trade-off between the benefits and costs of bigger and denser cities is not resolved in a socially optimal way is that the interests of existing and potential city residents are generally misaligned. Incumbent residents in the most productive cities often use planning regulations to limit entry into their city to maximise their welfare at the expense of potential newcomers. To study this, we develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogeneous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains from agglomeration. The model is grounded in strong microfoundations, matches key regularities at the city and economy-wide levels, and generates novel predictions that we provide evidence for. It can be quantified using few parameters that we estimate based on its key equations. Through counterfactual scenarios, we quantify the relevance of planning regulations and the effect of cities on economic growth and aggregate output.
One of the fundamental decisions individuals make in cities is the choice of the neighbourhood where to live. We spend about two-thirds of our time at home and around one-third of our income buying or renting it. Depending on our residential location choice, there are also substantial differences in the extent to which jobs, education opportunities and amenities are within reach and with whom we can interact. As circumstances change, so do our residential location choices, and in many countries, 5% or more of the population moves each year. Research on residential location choices tends to focus on common determinants across individuals or broad groups, such as job opportunities, housing costs, accessibility, amenities, and taxes. In this project, we also explore less traditional factors specific to each individual, such as their' self-perception and the location of their family and friends, which turn out to be crucial determinants of location choices.
Bigger cities offer more valuable experience and opportunities in exchange for higher housing costs. While higher-ability workers benefit more from bigger cities, they are not more likely to move to one. Our model of urban sorting by workers with heterogeneous self-confidence and ability suggests flawed self-assessment is partly to blame. Our empirical analysis shows that, consistent with our model, young workers with high self-confidence are more likely to initially locate in a big city. For more experienced workers, ability plays a stronger role in determining location choices, but the lasting impact of earlier choices dampens their incentives to move.
Using anonymised cellphone data, we also study how social networks shape residential mobility decisions. Individuals with few local contacts are more likely to change residence. Movers strongly prefer neighbourhoods where they already know more people nearby. Contacts matter because proximity to them is valuable and makes attractive locations more enjoyable. They also provide hard-to-find local information and reduce frictions, especially in home-search. Effects are not driven by similar people being more likely to be friends and move between certain locations. Recently-moved and more central contacts are particularly influential. With age, proximity to family gains importance over friends.
A key reason why the trade-off between the benefits and costs of bigger and denser cities is not resolved in a socially optimal way is that the interests of existing and potential city residents are generally misaligned. Incumbent residents in the most productive cities often use planning regulations to limit entry into their city to maximise their welfare at the expense of potential newcomers. To study this, we develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogeneous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains from agglomeration. The model is grounded in strong microfoundations, matches key regularities at the city and economy-wide levels, and generates novel predictions that we provide evidence for. It can be quantified using few parameters that we estimate based on its key equations. Through counterfactual scenarios, we quantify the relevance of planning regulations and the effect of cities on economic growth and aggregate output.
One of the fundamental decisions individuals make in cities is the choice of the neighbourhood where to live. We spend about two-thirds of our time at home and around one-third of our income buying or renting it. Depending on our residential location choice, there are also substantial differences in the extent to which jobs, education opportunities and amenities are within reach and with whom we can interact. As circumstances change, so do our residential location choices, and in many countries, 5% or more of the population moves each year. Research on residential location choices tends to focus on common determinants across individuals or broad groups, such as job opportunities, housing costs, accessibility, amenities, and taxes. In this project, we also explore less traditional factors specific to each individual, such as their' self-perception and the location of their family and friends, which turn out to be crucial determinants of location choices.
Bigger cities offer more valuable experience and opportunities in exchange for higher housing costs. While higher-ability workers benefit more from bigger cities, they are not more likely to move to one. Our model of urban sorting by workers with heterogeneous self-confidence and ability suggests flawed self-assessment is partly to blame. Our empirical analysis shows that, consistent with our model, young workers with high self-confidence are more likely to initially locate in a big city. For more experienced workers, ability plays a stronger role in determining location choices, but the lasting impact of earlier choices dampens their incentives to move.
Using anonymised cellphone data, we also study how social networks shape residential mobility decisions. Individuals with few local contacts are more likely to change residence. Movers strongly prefer neighbourhoods where they already know more people nearby. Contacts matter because proximity to them is valuable and makes attractive locations more enjoyable. They also provide hard-to-find local information and reduce frictions, especially in home-search. Effects are not driven by similar people being more likely to be friends and move between certain locations. Recently-moved and more central contacts are particularly influential. With age, proximity to family gains importance over friends.
Four articles have been published and another two have been completed and received a revise-and-resubmit decision From a journal
“Calling from the outside: The role of networks in residential mobility” (joint with Konstantin Büchel, Maximilian V. Ehrlich, and Elisabet Viladecans-Marsal) has been published in the Journal of Urban Economics in September 2020. Using anonymised cellphone data, we study how social networks shape residential mobility decisions.
"The economics of urban density" (joint with Gilles Duranton) has been published in the Journal of Economic Perspectives in Summer 2020. We explore the trade-off between benefits and costs of urban density and why it is unhappily resolved by market and political forces.
“City of dreams” (joint with Jorge De la Roca and Gianmarco Ottaviano) has been published in the Journal of the European Economic Association where it will be assigned an issue in 2023. This highlights the important role of self-confidence in driving location choices over worker's life cycle.
“Urban growth and its aggregate implications” (joint with Gilles Duranton) has been revised and resubmitted to Econometrica. We develop an urban growth model to assess quantitatively the effect of cities and urbanisation on economic growth and aggregate income.
“Trade and Frictional Unemployment in the Global Economy” (by postdoctoral researcher Anna Grujovic joint with Céline Carrère and Frédéric Robert-Nicoud) has been published in the Journal of the European Economic Association in December 2020. It studies how trade integration affects unemployment through the reallocation of employment across sector with different frictions.
“The Role of Establishment Size in the City-Size Earnings Premium” (by postdoctoral researcher Clara Santamaría joint with Charly Porcher and Hannah Rubinton) has been revised and resubmitted to Journal of Urban Economics Insights.This studies how much of the city- size earnings premium can be attributed to transitions to larger and better-paying establishments.
“Calling from the outside: The role of networks in residential mobility” (joint with Konstantin Büchel, Maximilian V. Ehrlich, and Elisabet Viladecans-Marsal) has been published in the Journal of Urban Economics in September 2020. Using anonymised cellphone data, we study how social networks shape residential mobility decisions.
"The economics of urban density" (joint with Gilles Duranton) has been published in the Journal of Economic Perspectives in Summer 2020. We explore the trade-off between benefits and costs of urban density and why it is unhappily resolved by market and political forces.
“City of dreams” (joint with Jorge De la Roca and Gianmarco Ottaviano) has been published in the Journal of the European Economic Association where it will be assigned an issue in 2023. This highlights the important role of self-confidence in driving location choices over worker's life cycle.
“Urban growth and its aggregate implications” (joint with Gilles Duranton) has been revised and resubmitted to Econometrica. We develop an urban growth model to assess quantitatively the effect of cities and urbanisation on economic growth and aggregate income.
“Trade and Frictional Unemployment in the Global Economy” (by postdoctoral researcher Anna Grujovic joint with Céline Carrère and Frédéric Robert-Nicoud) has been published in the Journal of the European Economic Association in December 2020. It studies how trade integration affects unemployment through the reallocation of employment across sector with different frictions.
“The Role of Establishment Size in the City-Size Earnings Premium” (by postdoctoral researcher Clara Santamaría joint with Charly Porcher and Hannah Rubinton) has been revised and resubmitted to Journal of Urban Economics Insights.This studies how much of the city- size earnings premium can be attributed to transitions to larger and better-paying establishments.
We have developed an urban growth model to assess quantitatively the effect of cities and urbanisation on economic growth and aggregate income. The model also has novel predictions for the determinants and consequences of planning regulations. Studying residential location choices, we highlight the importance of flawed self-assessment in determining where young individuals locate and the lasting consequences of early location choices. We also use anonymised cellphone date to show that taking into account where each person’s family and friends live doubles our ability to predict who will move and where, helping understand why apparently similar people make different choices and why the same location attributes have very different effects on them.