Session 1 Course Introduction and Role of Cities in Economic Development
Introduction of students (interest in the topic, previous experience, sharing what they like and dislike about their city),
Course contents, and method. Review of main questions, concepts, axioms and urban trends. Spatial organization of economic activity. Importance of location and location decisions. Tools of urban analysis.
Key questions: What is a city and why do they exist? Why is economic activity concentrated in specific locations? Does it make sense to try and correct spatial inequalities? Is urbanization good for development? What happens to places that do not matter anymore ?
Analytic tools: review concepts from microeconomics that provide a foundation for urban economics.
Readings
Required Readings
O’Sullivan Chapter 2 (Why Do Cities Exist?), Chapter 3 (Why Do Firms Cluster?) Chapter 4 (City Size)
World Bank. 2008. Overview
Freire and Stren, Introduction, pp. xvii -xli
Grover, Lall, and Maloney (2022). Overview
Henderson, J. Vernon and Turner, Matthew A. (2020) Urbanization in the developing world: too early or too slow? Journal of Economic Perspectives, 34 (3).
Supplementary
Angel, Shlomo. 2012 Planet of Cities. Lincoln Institute of Land Policy. Chapter 1 (Coming to Terms of Global Urban Expansion) and Chapter 6 (Urbanization in Historical Perspective)
Rodriguez, Jorge and George Martine, 2008. “Urbanization in Latin America and the Caribbean; Experiences and Lessons Learned.” In G. Martine et all, The New Frontier chapter 21.
Part I Urban Fundamentals – Urban economy and the growth of cities
Session 2: Urban Economy (I): Agglomeration Economies
Key questions:
What is the role of urban density in economic development? What are agglomeration economies, how are they measured, and why do they matter? How does a nation’s system of cities evolve and what does this tell us about a nation’s economic development? How do cities grow and how do the forces of agglomeration and congestion shape the development of a city?
Required Readings
O’Sullivan. 2009. Chapter 2 (Why Do Cities Exist?), Chapter 3 (Why Do Firms Cluster?) Chapter 4 (City Size)
World Bank. 2008. Chapters 1 and 4
Grover, Lall, and Maloney (2022). Chapter 2
Duranton, Gilles, and Diego Puga. 2020. "The Economics of Urban Density." Journal of Economic Perspectives, 34 (3): 3-26
Edward L. Glaeser, Stuart S. Rosenthal, and William C. Strange. 2010. Urban economics and entrepreneurship. Journal of Urban Economics 67 1–14
Supplementary
Duranton, Gilles, 2007. Urban evolutions: the fast, the slow, and the still. American
Economic Review 91, 197–221.
Duranton, G., Puga, D., 2001. Nursery cities: Urban diversity, process innovation, and the life-cycle of products. American Economic Review 91, 1454–1477
Henderson, Vernon. 2015. Urbanization and the Geography of Development. In The Urban Imperative Ed. E. Glaeser and Abha Joshi-Ghani. Oxford University Press. Washington DC
Session 3: Urban Economy (II): Is urbanization in developing nations different?
Key questions:
Is urbanization in developing nations different than what we see in developed nations? Why? Do we need a new framework for analyzing urbanization in developing nations? What drives diverging patterns of development? Is urban density a boon or a curse in developing nations?
Required Readings
Grover, Lall, and Maloney (2022). Chapter 2
Lall, S.V. , Henderson V., Venables, A. 2017. Overview, Chapters 1-4
World Bank and the Development Research Center of the State Council, P. R. China. 2014. Urban China: Toward Efficient, Inclusive, and Sustainable Urbanization. Washington, DC: World Bank . Chapter 1
Paul Collier, Anthony J. Venables, Urbanization in developing economies: the assessment, Oxford Review of Economic Policy, Volume 33, Issue 3, Autumn 2017, Pages 355–372
Ahlfeldt, G.M., Pietrostefani, E., 2019. The economic effects of density: a synthesis. J. Urban Econ. 111
Arti Grover, Somik Lall, Jonathan Timmis, 2023. Agglomeration economies in developing countries: A meta-analysis, Regional Science and Urban Economics, Volume 101, 2023,
Blogs and Podcasts
No Urban Myth: Building Inclusive and Sustainable Cities in the Pandemic Recovery
Pandemic Recovery (podcast https://monocle.com/radio/shows/the-urbanist/458/world-bank-and-pandemic-recovery/)
Supplementary
Combes, P.P., Gobillon, L., 2015. The empirics of agglomeration economies. In: Duranton, G., Henderson, J.V., Strange, W.C. (Eds.), Handbook of Regional and Urban Economics, vol. 5. Elsevier, North-Holland, pp. 247–348.
Somik V. Lall, Renewing expectations about Africa’s cities, Oxford Review of Economic Policy, Volume 33, Issue 3, Autumn 2017, Pages 521–539
Saunders, Douglas. 2010. The Arrival City. Pantheon books. Chapter 5. The first Great Migration.
Venables, Anthony 2017 Breaking into tradables: Urban form and urban function in a developing city. Journal of Urban Economics Volume 98, 88-97
Samad, T., Lozano-Gracia and A Panman (2010) Colombia Urbanization Review The World Bank (Chapters 2 and 3).
Session 4: Growth of Cities (I)– Analytic Framework --Land Use, Transportation, and Agglomeration economies
Key questions:
What drives the shape and growth of cities, and what actions can policy makers take to guide their growth? How do land market, building and land use regulations, taxes, and the investment in and placement of public assets—in particular the transportation network influence city growth? How does the economic composition of a city influence its physical and economic growth?
Required Readings
Lall, Lebrand, Park, Sturm, and Venables 2021. Overview and chapters 1-3
Henderson, J. V., T. Regan, and A. J. Venables. 2020. “Building the City: From Slums to a Modern Metropolis.” LSE Research Online Documents on Economics 105054, London School of Economics and Political Science, LSE Library.
Angel, S., J. Parent, D. L. Civco, A. Blei, and D. Potere. 2011. “The Dimensions of Global Urban Expansion: Estimates and Projections for All Countries, 2000–2050.” Progress in Planning 75 (2): 53–107.
Supplementary
Heblich, S., S. J. Redding, and D. M. Sturm. 2020. “The Making of the Modern Metropolis: Evidence from London.” The Quarterly Journal of Economics 135, (4): 2059–2133.
Session 5: Growth of Cities (II): Deep dive -- Local government and urban finance
The capacity of cities to manage growth and provide services is determined in large part by the decentralization framework that defines the division of responsibilities and tax authority between local and national government. This session will discuss the criteria for decentralizing revenues and responsibilities and possible results in terms of outcomes, such as service delivery, quality of life and governance. We will review the patterns of expenditure assignment and the sources of income accruing to cities. We will also discuss access to infrastructure finance and borrowing.
In addition, local governments should be able to leverage their own assets, borrow from credit markets and engage in private public partnerships to develop infrastructure and promote inclusive growth.
Key Questions
What is the extent to local government remit and capacity in managing urban growth? What is the state of finances of cities in developing nations? Do sources of financing vary between cities of developed and developing countries? What are the economic advantages of land-based revenues? How should cities decide between borrowing and forming private public partnerships when financing urban infrastructure?
Required Readings
Edward Glaeser 2013. Chapter 4 - Urban Public Finance, Editor(s): Alan J. Auerbach, Raj Chetty, Martin Feldstein, Emmanuel Saez, Handbook of Public Economics, Volume 5.
Roy W. Bahl, Johannes F. Linn, Deborah L. Wetzel. (eds) 2013. Financing metropolitan governments in developing countries. chapters 1, 6, 9. 15
Roy W. Bahl, and Johannes F. Linn 2014. Governing and Financing Cities in the Developing World. Lincoln Institute for Land Policy
Supplementary
Peterson, G. 2009 “Unlocking Land Values to Finance Urban Infrastructure” the World Bank, Trends and Policy Options, No 7
Freire, M and John Petersen (2004): Access to Subnational Credit in Developing Countries, Oxford University Press. Contains 20 case studies for cities in Latin America and other regions
Canuto and Liu (2013), Until Debt Do US Part, Subnational Debt, Insolvency and Markets (Pages 177-367). The World Bank.
Leipziger, David Land value capture in Mexico City (2021) . Status of a New Value Capture Tool in Mexico City, El Sistema de Actuación por Cooperación
https://www.lincolninst.edu/sites/default/files/pubfiles/leipziger_wp21dl1.pdf
Catherine Farvacque-Vitkovic and Mihaly Kopanyi eds. (2019) Better Cities Better World: A Handbook on Local Governments Self-Assessment. The World Bank. Washington
Session 6: Global Cities in the Developing World: Bogota, Johannesburg, Mumbai, and Shanghai
Bahl, R., Linn, J., and Wetzel, D. (eds). 2013. Financing Metropolitan Governments in Developing Countries. Lincoln Institute of Land Policy. Boston. Chapters 10 (Mumbai), 11 (China) and 12 (Sao Paulo).
Colombia Urbanization Review, Samad, Taimur, Lozano-Gracia, Nancy, and Panman, Alexandra
Directions in Development – World Bank. September 2012 (https://elibrary.worldbank.org/doi/abs/10.1596/978-0-8213-9522-6)
Glasser, E. 2011. Flat World, Tall City in The Triumph of the City, pp 247 -270
Shanghai 2050 – unpublished report – documents to be shared by the instructor
World Bank 2009. Reshaping Economic Geography. Chapter 3 - Division
World Bank. 2013. Urbanization beyond Municipal Boundaries : Nurturing Metropolitan Economies and Connecting Peri-Urban Areas in India. Directions in Development. Washington, DC: World Bank.
Part II Urban Challenges and Policies
Session 7: Urban Transportation and Infrastructure
Cities are not just places where people live. They are massive labor markets and engines of economic growth, facilitating structural transformation of economies towards manufacturing and service activities. New urban transport infrastructure changes how people access jobs and matches employees to firms. The relationship between urban development and transport systems is both critical and complex. Without effective urban transit, commuting becomes too costly, and cities cannot deliver on their full economic potential.
Key Questions
What is the role of transportation in connecting people and jobs in cities? How can policymakers combine transport and land use policies to generate greater economic and social benefits for local residents? How can cities combine transport infrastructure and services?
Required Readings
Edward Glaeser (2022) Infrastructure and Urban Form. In Infrastructure economics and policy: international perspectives . Edited by José A. GómezIbáñez and Zhi Liu
Grover, Lall, and Maloney (2022). Ch 7
Cervero, Roberto, H. Suzuki and K. Iuchi. 2013. Transforming Cities with Transit. Washington, D.C.: World Bank
Nick Tsivanidis (2022) Evaluating the Impact of Urban Transit Infrastructure: Evidence from Bogotá’s TransMilenio.
VOX coverage, World Bank Coverage
GLAESER, E., KAHN, M., AND J. RAPPAPORT (2008), “Why do the poor live in cities? The role of public transportation,” Journal of Urban Economics, 63(1):1–24.
Supplementary
(*) Suzuki, H, J. Murakami, Yu-Hung Hong, and Beth Tamayose. 2015. Financing Transit-Oriented Development with Land values. (Chapters 5 and 6) (Cases of New York, Washington DC. London, and Nanchang (China). World Bank. Washington.
Dinesh Mohan, 2015. Autonomous vehicles and their future in low- and Middle-income countries. Marron Institute. Working Paper. Available at http://marroninstitute.nyu.edu/uploads/content/Mohan_2015_Autonomous_Vehicles_DMohan_Marron.pdf
BALTES, M., J. BARRIOS, A. CAIN, G. DARIDO, P. RODRIGUEZ (2006), “Applicability of Bogotá’s TransMilenio BRT System to the United States,” Federal Transit Administration Report Number FL-26- 7104-01
GONZALEZ-NAVARRO, M., AND M. TURNER (2018), “Subways and urban growth: Evidence from Earth,” Journal of Urban Economics, 108:85-106.
Session 8: Housing and Land Markets: Economic Framework
Housing and Land markets play a fundamental role in the way cities operate. Heavy controls result in high land prices and possibly unaffordable housing. Too much flexibility may lead to sprawl, low density, and higher carbon emissions. This session explores the relation between real estate and the national economy and how the public sector often fails to maximize the benefits of good land management policies. The question of land titling and access of the poor to housing services and housing assets is studied in the context of poverty alleviation strategies and urban upgrading programs. In recent times, land has also become an important source of finance for many cities, especially rapidly growing cities as in China. The rationale for taxing urban land is discussed as well.
Required Readings
Rojas, Eduardo. 2018. No time to waste. in applying the lessons from Latin America’s 50 years of housing policies. IEED , http://journals.sagepub.com/doi/pdf/10.1177/0956247818781499
O’Sullivan/ Urban Economics (Chapters 6, 7 and 9). Urban Land Rent and Land-Use Patterns
(*) Arnott, R. 2009. Housing Policy in Development Countries, the Importance of the Informal Economy. Urbanization and Growth, Spence et al, etc., Growth Commission.
Brookings, 2021. The emerging solidarity economy. A primmer of community ownership of real estate at https://www.brookings.edu/ essay/the-emerging-solidarity-economy-a-primer-on community ownership of real estate
Bertaud, Alain. 2015. “Converting Land and Affordable Housing Floor Space”. In The Urban Imperative (Chapter 14)
Freire, M. 2013. “Slum Upgrading” in Bahl, R., Linn, J., and Wetzel, D. (eds). Financing Metropolitan Governments in Developing Countries. Lincoln Institute of Land Policy. Boston.
Ortiz, Alexandra and Alain Bertaud “Land Markets and Urban Management: The Role of Planning Tools” in The Challenge of Urban Government (pp. 239 –252)
Supplementary
Acolin, Arthur and Green, Richard K. 2015. Measuring Housing Affordability in Sao Paulo Metropolitan Region. Available at http://ssrn.com/abstract=2553488 or http://dx.doi.org/10.2139/ssrn.2553488
Session 9: Urban inequality
Cities attract migrants from the rural sector, especially in the first phases of urbanization, as productivity and wage levels are higher in urban areas. The inflow may be overwhelming for cities without the capacity to provide basic services to the newcomers, leading to the sprouting of slums, informal settlements, and spreading poverty. This session explores the main dimensions of urban poverty -- indicators, public policies and programs, links with labor markets, growth and social policies, and the design of well targeted poverty programs. We also discuss the political economy of urban upgrading and the apparent and widespread use of exclusionary policies in major cities in Latin America and Asia. Major targeted poverty alleviation programs will be discussed.
Readings
Lee, Neil, 2018 Inclusive Growth in Cities: A sympathetic critique, LSE III Working Papers
Pernia and Quibria “Poverty in Developing Countries” in Handbook of Regional Economics (Chapter 45)
Sanders, Doug. 2010. Outside In, Arriving in Style. In The Arrival City (Chapters 2 and 10)
Feler, Leo and Vernon Henderson (2010). Exclusionary policies in urban development: Under-servicing migrant households in Brazilian cities.
Fay, Marianne. 2005. Urban Poor in Latin America, World Bank
Perlman, Janice. 2010. Favela (Chapters 6 and 7)
Galiani, S., Gertler,P., Undurraga. R., Cooper R., and Ross A. 2017. Shelter from the storm: Upgrading housing infrastructure in Latin American slums. Journal of Urban Economics, 98. 187-213 Available at https://doi.org/10.1016/j.jue.2016.11.001
Freire, M., Hoornweg, D., Stren R., and Slack, E. (2016). Inclusive Cities. Issues and Opportunities. http://scioteca.caf.com/bitstream/handle/123456789/953/InclusiveGrowthInCities-30nov.pdf?sequence=5&isAllowed=y
Francois Bourgignon “Crime as a Social Cost of Poverty.” in Shahid Yusuf et all Facets of Globalization: International and local Dimensions of Development, pp. 171 – 192
Session 10: Regional inequality – Places Left behind
In the most prosperous areas of low-income and middle-income countries today, living standards—measured by household consumption—are more than twice that of similar households in economically lagging areas. In high-income countries, the difference is only 50 percent higher. Large and sustained gaps in living standards in different locations within countries have led to increased concern, even alarm, in policy circles about “places left behind.” These issues take on new salience as climate, technology, and trade shocks leave once prosperous areas behind, generating demand for specifically targeted and costly spatial policies whose track records are, fairly viewed, mixed. This session will examine the extent and drivers of regional inequality within countries.
Readings
World Bank. 2008. Chapters 2 and 5
Grover, Lall, and Maloney (2022). Chapter 3 and 5
Autor, D. H., D. Dorn, and G. H. Hanson. 2013. “The Geography of Trade and Technology Shocks in the United States.” American Economic Review 103 (3): 220–25.
Austin, B. A., E. L. Glaeser, and L. H. Summers. 2018. “Jobs for the Heartland: Place-Based Policies in 21st Century America.” Working Paper 24548, National Bureau of Economic Research, Cambridge, MA.
Rodríguez-Pose, A. 2018. “The Revenge of the Places That Don’t Matter (and What to Do about It).” Cambridge Journal of Regions, Economy and Society 11(1):189–209.
Session 11: Places Left Behind – Do Regional Development Policies Work?
Widespread regional inequalities have given rise to increased concern in policy circles about low growth, dysfunctional cities, and “places left behind.” Regional development policies are increasingly advanced with varying motivations. On the grounds of economic efficiency and growth, there is a desire to exploit the “untapped potential” of lagging regions, implicitly assumed to be underperforming because of market failures or barriers to a more efficient allocation of capital and technology. Beyond efficiency considerations, the political and social value of place-specific, job-creating policies is being championed, along with an emphasis on the intrinsic value of work that enhances a person’s well-being. Finally, concerns abound that pronounced and sustained territorial inequalities can sow social discontent, tensions, and political unrest, which in turn can fuel the rise of populist movements, leaders, and parties.
The common feature of these policies is that they target a particular place rather than a class of individuals (as does education policy), economic sectors (as does industrial policy), or institutions (as do governance reforms). Vast resources are being dedicated to place-based policies. The European Union allocated €180 billion in the 2014–20 programming period on less developed regions to “reduce disparities between the levels of development of the various regions and the backwardness of the least favored regions” (Article 174 of the Treaty of the Functioning of the European Union). In the United States, about $95 billion is spent annually on place-based economic development programs by federal and state governments. The record of such interventions to date has been mixed at best.
This session will provide a better understanding of the forces that lead to spatial inequalities to begin with and that eventually constrain policy. We will also discuss a framework to structure sound cost-benefit analysis of such policies.
Required Readings
World Bank. 2008. Chapter 8
Grover, Lall, and Maloney (2022). Chapter 5-8
Supplementary
Bartik, T. J. 2003. “Local Economic Development Policies.” Upjohn Institute Working Paper 03-91, W. E. Upjohn Institute for Employment Research, Kalamazoo, MI.
Bartik, T. J. 2012. “The Future of State and Local Economic Development Policy: What Research Is Needed.” Growth and Change 43 (4): 545–62.
Bartik, T. J. 2018. What Works to Help Manufacturing-Intensive Local Economies? Upjohn Institute Technical Report 18-035. Kalamazoo, MI: W. E. Upjohn Institute for Employment Research. https://doi.org/10.17848/tr18-035.
Bartik, T. J. 2020. “Place-Based Policy: An Essay in Two Parts.” Policy Paper 2020-021, W. E. Upjohn Institute for Employment Research, Kalamazoo, MI
Duranton, G., and A. J. Venables. 2018. “Place-Based Policies for Development.” Policy Research Working Paper 8410, World Bank, Washington, DC.
Neumark, D., and H. Simpson. 2015. “Place-Based Policies.” In Handbook of Regional and Urban Economics, Vol. 5, edited by G. Duranton, J. V. Henderson, and W. C. Strange, 1197−287. Amsterdam: Elsevier
Session 12: Cities and Climate Change -- Carbon Emissions
The Glasgow Pact, a result of the climate meetings in November, emphasizes the need for much deeper emissions cuts, noting that without major decarbonization efforts, the world will cross the 1.5° C threshold for global warming, and risk catastrophic impacts on people and ecosystems. The conclusions of COP26 present a critical opportunity to reflect on the role cities play in contributing to greenhouse gas emissions (GHGs). Identifying the sources of these emissions, along with ways to accurately measure and monitor them, is a first step toward reducing them in a meaningful manner.
Cities account for over 70% of global CO2 emissions, most of which come from industrial and motorized transport systems that use huge quantities of fossil fuels and rely on far-flung infrastructure constructed with carbon-intensive materials. Clearly, staying below the 1.5° C threshold means massive decarbonization of cities, which will require investments in low-carbon energy and transport systems, programs to reduce urban sprawl, and nature-based solutions for urban cooling and disaster risk management.
In this session, we will discuss the contribution of cities to GHG emissions and articulate what can be done by city leaders to manage this externality vs. where city leaders need to work with other levels of government and the private sector.
Required Readings
Dasgupta, S., S. Lall and D. Wheeler (2021) Urban CO2 Emissions: A Global Analysis with New Satellite Data. World Bank Policy Research Working Paper 9845
Matthew E. Kahn and Somik Lall (2022) Will the Developing World’s Growing Middle Class Support Low Carbon Policies? NBER Working Paper No. 30238
Acemoglu, Daron, Ufuk Akcigit, Douglas Hanley, and William Kerr. "Transition to clean technology." Journal of political economy 124, no. 1 (2016): 52-104.
Davis, Lucas W., Alan Fuchs, and Paul Gertler. "Cash for coolers: evaluating a large-scale appliance replacement program in Mexico." American Economic Journal: Economic Policy 6, no. 4 (2014): 207-38
Dasgupta, Susmita, Benoit Laplante, Hua Wang, and David Wheeler. "Confronting the environmental Kuznets curve." Journal of economic perspectives 16, no. 1 (2002): 147-168
Session 13: Climate Change Adaptation
Climate change is increasing the frequency and intensity of disasters, but the ability to cope varies widely across the globe. In this session, we will explore how city death tolls and economic activity are affected by climate risk. Are richer places with the resources and infrastructure to cope with disasters more resilient? Compared to cities in low-income countries, do those in high-income countries suffer fewer deaths per disaster and have adapted over the years to better mitigate the effects of climate risk, and recovered faster from economic damage?
Required Readings
Ehrlich, I. and Becker, G. S. (1972) Market insurance, self-insurance, and self-protection, Journal of Political Economy, 80, 623–648
Sahil Gandhi, Matthew E. Kahn, Rajat Kochhar, Somik Lall, and Vaidehi Tandel (2022) Adapting to Flood Risk: Evidence from a Panel of Global Cities, NBER Working Paper. No. 30137
Kocornik-Mina, A., McDermott, T. K., Michaels, G. and Rauch, F. (2020) Flooded cities, American Economic Journal: Applied Economics, 12, 35–66.
Stephane Hallegatte, Adrien Vogt-Schilb, Mook Bangalore, and Julie Rozenberg (2017) Unbreakable: Building the Resilience of the Poor in the Face of Natural Disasters. World Bank. .
Stephane Hallegatte, Mook Bangalore, Laura Bonzanigo, Marianne Fay, Tamaro Kane, Ulf Narloch, Julie Rozenberg, David Treguer, and Adrien Vogt-Schilb (2016) Shock Waves: Managing the Impacts of Climate Change on Poverty
Supplementary
Boustan, L. P., Kahn, M. E. and Rhode, P. W. (2012) Moving to higher ground: Migration response to natural disasters in the early twentieth century, American Economic Review, 102, 238–44
Burke, M. and Emerick, K. (2016) Adaptation to climate change: Evidence from US agriculture, American Economic Journal: Economic Policy, 8, 106–40.
