Academic journal article Monthly Labor Review

Urban Economics

Academic journal article Monthly Labor Review

Urban Economics

Article excerpt

What can economics tell us about cities? What can be learned by applying the tools of economics to urban issues such as housing and poverty? Why do people choose to live so close each other?

Edward L. Glaeser gives an overview of urban economics in, "The Economics Approach to Cities" (National Bureau of Economic Research, Working Paper 13696).

Urban economics, the author says, is based on the study of the spatial equilibrium that develops as employers, workers, and builders answer the question, "Where?": Where to live, where to do business, where to build? Much like the old real estate maxim--"location, location, location"--location choice is central to urban economics.

In a spatial equilibrium, the advantages (for a worker or employer) of given location are balanced by that location's disadvantages; something good is offset by something bad. For a worker, a residential location with short commute will be expensive; for an employer, high productivity is offset by high wages.

In the urban economist's models, no benefit is gained by a change location once spatial equilibrium reached. …

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