| Learning objectives |
After completing the course, the student is
expected to be able to:
- Describe urban fabric.
- Describe urban pricing, urban distress (poverty and
segregation) and urban externalities (crime, congestion and
pollution).
- Describe and explain the fundamental principles behind urban
structure and urban sprawl.
- Define the necessary quantitative tools for projecting the
development in urban areas.
- Analyze housing prices (hedonic price analysis) and residential
location choice.
- Analyze urban – incl. transport – policy reforms and land use
controls.
- Use models to welfare-analysis and cost-benefit analysis.
- Evaluate the effects on welfare of policy interventions such as
transport policy reforms and land use controls.
- Argue concerning the usefulness of a specific model for a
specific problem.
- Implement and explain a welfare analysis of an urban area.
- Explain how different economic factors influence the real
estate market and affect real estate values.
|
| Course prerequisites |
| The students should have an understanding of
basics of microeconomics at the level of Hal R. Varian’s
"Intermediate Microeconomics” or similar, and knowledge of
econometrics at the level of Jeffrey Wooldridge’s “Introductory
Econometrics” or similar. |
| Examination |
|
Applied Urban
Economics and Real Estate:
|
| Exam
ECTS |
7,5 |
| Examination form |
Home assignment - written product |
| Individual or group exam |
Individual exam |
| Size of written product |
Max. 15 pages |
| Assignment type |
Project |
| Release of assignment |
Subject chosen by students themselves, see
guidelines if any |
| Duration |
Written product to be submitted on specified date
and time. |
| Grading scale |
7-point grading scale |
| Examiner(s) |
One internal examiner |
| Exam period |
Winter |
| Make-up exam/re-exam |
Same examination form as the ordinary exam
If the student fails the ordinary
exam the course coordinator chooses whether the student will have
to hand in a revised product for the re-take or a new
project.
|
Description of the exam
procedure
Students conduct a short analytical project. In this project
they apply the basis urban economic analysis which have been
covered in the lectures. This project should include a brief
introduction, discussion of the methods used, presentation of the
results and a conclusion. Students are expected to show an
understanding of the basis urban economic theory, justify their
choice of the models and discuss the results appropriately. The
project is written in parallel with the course and is of 15
A4-pages. The project must be submitted at the end of the teaching
term.
|
|
| Course content, structure and pedagogical
approach |
|
In the age of urbanization and gentrification real
estate investments have become increasingly attractive. However,
several challenges are currently facing modern cities. These
encompass different urban disamenities such as congestion,
noise, pollution, and the higher risks of spread of diseases (e.g.
COVID 19). Others involve issues related to the labour market
including the increasing commuting times, low real wage growth,
and skills gap. But, maybe the largest of all is the raising
housing prices (the apparent consequence of agglomeration
economies) resulting from the migration to large cities (the
urbanization process).
This course focuses on presenting and discussing the basis
urban economic analysis and its use in policy evaluation. It
also looks at how various economic factors influence the real
estate market and affect real estate values. The main themes which
will be covered in the course are: agglomeration economies,
analysis of urban spatial structure (commuting, housing production
and population density), urban sprawl and land-use controls,
hedonic price analysis, residential location choice and tenure
choice, housing policies, urban distress (urban poverty and
segregation), urban externalities (congestion, crime and
pollution), cities and transport systems, and spatial labor markets
(monopsony):
-
Agglomeration economies: why do cities exist? This is
the fundamental question of urban economics. The answer to this
question depends, at least partly, on the agglomeration economies
and the scale economies. The agglomeration economies make larger
urban areas (cities) more productive than small ones and the scale
economies are known as “increasing returns to scale”. Urban
economists have had a major effect on policy, and the trend toward
city (de)regulation and many of the urban policies (e.g. land-use
controls, rent controls and housing subsidy programs) and the
abolitions of the place based policies are due to lessons from
urban economics.
-
Spatial equilibrium in the Alonso-Muth-Mills model: The
basic urban economic model is a monocentric city model. Essential
assumptions in this model are that employment is constrained in one
location, monetary commuting costs depend on distance, and workers
may freely choose the optimal residence location. Furthermore, it
is assumed that house prices are endogenous and workers are
homogeneous in all aspects except for income. The seminar provides
a mainstream treatment of urban spatial structure including demand
for housing and commuting in a standard monocentric city
model.
-
The static model and the Rosen-Roback framework: In the
standard monocentric city model, the role of residential amenities
is ignored, but these are clearly important. In the Rosen-Roback
framework, the residential location choice, job location and
commuting distance depends explicitly on the spatial distribution
of residential urban amenities. The seminar offers a detailed
analysis of the possible implication of spatial distribution of
urban amenities. For example, suppose that all jobs and amenities
are in city centres. This is likely a reasonable description for
Denmark, where residential amenities and employment tend to be in,
or close to, historic city centres. In this case, an increase in
household income would induce households to move residence closer
to city centres. Another example can be the analysis of urban
externalities (e.g. congestion, crime and pollution).
-
Hedonic price analysis and the residential location
choice: Property value hedonics is the workhorse model for
valuation of local public goods and urban amenities. The hedonic
price function describes a price equilibrium on a market for a
heterogeneous commodity, without describing the underlying forces
of demand and supply. Models of residential location choice
(equilibrium sorting models) provide a structural description of
the market which opens up the possibility for doping counterfactual
(policy) analysis. The recent literature has demonstrated that
household location choices are not only affected by the
accessibility to employment opportunities but also by accessibility
to urban amenities. The seminar provides an introduction to current
practice in using hedonic price analysis and residential sorting
models. The residential sorting models are useful for analyses of
urban distress (e.g. urban poverty and segregation).
-
Transportation and land use in urban areas: The role
that transportation plays in the spatial development of urban areas
is of great interest. The focus here is on the question of where
consumption or production occurs, instead of the question of how
much to consume and produce. In order to answer this question, a
monocentric theory of residential an employment location can be
applied.
These topics cover many of the important urban economic issues
that have emerged in the academic literature over the past three
decades. The focus will be on selected topics dealing with
contemporary issues of urban policy such as pricing and
regulation.
This course will also benefit the students by providing i) deep
business knowledge related to real estate markets, ii) by
discussing ethical dilemmas emerging from urbanization and
gentrification, and iii) by allowing them to protect the prosperity
of next generations.
|
| Description of the teaching methods |
The course is composed of 11 three-hour lectures
and 6 computer classes (workshops) .
Lectures:
Class 1: Why cities exist?
Class 2: Standard monocentric city model
Class 3: Modifications of the standard monocentric city model
Class 4: Agglomeration and urban sprawl
Class 5: Agglomeration and firm productivity
Class 6: Freeway congestion
Class 7: Housing demand
Class 8: A simple empirical sorting model (structural hedonic
model)
Class 9: Local public goods
Class 10: Rosen-Roback framework
Class 11: New economic geography
In the computer classes, students have the opportunity to
consolidate the material from the lectures. The approach is
problem-based. The lectures will introduce the examples and the
required programming tools. The course will use the statistical
software STATA / R.
Computer classes (workshops):
Computer class 1: Introduction: bid-rent curve, household incomes
and wages
Computer class 2: Firm total factor productivity (TFP) and job
density
Computer class 3: Hedonic house price index
Computer class 4: Heterogeneity in marginal willingness-to-pay
Computer class 5: Urban quality-of-life measurement |
| Feedback during the teaching period |
| Feedback is given in the class as well as during
office hours, which are organized once a week for the duration of
the course. The students project ideas will be presented and
discussed in Class 6. This is an opportunity for students to get
feedback on their project ideas and to learn from one
another. |
| Student workload |
| Classroom attendance |
33 hours |
| Preparation |
100 hours |
| Examination (including preparation) |
73 hours |
|
| Expected literature |
|
Brueckner, J. K. 2011. Lectures on urban economics. The MIT
Press, Cambridge, Massachusetts, London, England.
Selected scientific articles to be specified during the course,
e.g:
- Bajari, P. and M.E. Kahn. 2005. Estimating housing demand
with an application to explaining racial segregation in
cities. Journal of Business & Economic Statistics, Vol.
23, No. 1, pp. 20-33.
- Glaeser, E.L., J. Kolko and A. Saiz. 2001. Consumer
city. Journal of Economic Geography, 1, pp. 27-50.
- Kuminoff, N.V., V.K. Smith and C. Timmins. 2013. The new
economics of equilibrium sorting and policy evaluation using
housing markets. Journal of Economic Literature, 51(4), pp.
1007-1064.
- Kuminoff, N.V., C.F. Parmeter and J.C. Pope. 2010. Which
hedonic models can we trust to recover the marginal willingness to
pay for environmental amenities? Journal of Environmental
Economics and Management, 60, pp. 145–160.
- Mulalic, I. and J. Rouwendal.2020. Does improving public
transport decrease car ownership? Evidence from a residential
sorting model for the Copenhagen metropolitan area. Regional
Science and Urban Economics, 83, 103543.
- Roback, J. 1982. Wages, rents, and the quality of
life. Journal of Political Economy, Vol. 90, No. 6, pp.
1257-1278.
- Rosenthal, S.S. and W.C. Strange. 2004. Evidence on the
nature and sources of agglomeration economies. Handbook of
Regional and Urban Economics, chapter 49, Volume 4. Edited by J.V.
Henderson and J.F. Thisse. Elsevier.
- Stephen J. Redding, S. J. and E. Rossi-Hansberg. 2017.
Quantitative Spatial Economics. Annual Review of Economics
9:1, pp. 21-58.
Further recommended readings and articles will be posted on
Canvas
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