URBAN ECONOMICS

SPRING 2011

Introduction

Urban Economics emphasize:• The spatial arrangements of households, firms

and capital in metropolitan areas;• The externalities which arise from the

proximity of households and land uses;• The public policy issues which arise from the

interplay of these economic forces.

What is an urban area?

• A contiguous area with a population of at least 2,500 to 25,000 (occassionally 50,000) people in which a majority resident workers are in nonagricultural sectors and possibly having a minimum population density (Mills, 2000;8).

• A geographical area is considered “urban” if it contains a large number of people in a relatively small area.

Metropolitan area and municipality

Metropolitan area:• An area containing a large population nucleus and the

nearby communities that are integrated, in an economic sense, with the nucleus.

• The nucleus is either a city with a population greater than 50000 people or an urbanized area.

Municipality:• An area over which a municipal corporation exercises

political authority, providing local government services such as sewerage, crime protection, fire protection, etc.

Why do urban areas exist?

• Main reason: Proximity among diverse activities economizes on cost of moving goods, people and information.

• Urban areas have advantages since they provide:

• Economies of scale;• Economies of scope;• Agglomeration economies.

Population densities(people/sq km)

1. Manila (43079) Phillipinnes2. Yonghe Taiwan (ROC)8. Delhi India38. Paris France46. Athens Greece

New York 2049Istanbul 1937Izmir 285Ankara 156Tunceli 12

Historical development of cities

Near east around 3000 B.C.Mesopotamia Valley: City states2000 B.C. : BabylonShortly after agricultural breakthroughs that

generated a surplus of food.Defensive city: Scale of economies in storageReligious city: Worship at a greater scale

Historical development of cities

• Greek city sites (500 B.C.) – Athens: largest one, market city,

population: 150000– Sparta: Population: 40000• Roman Empire : Colonial cities, 3rd century A.D.• Feudal cities: 11th-14th centuries

England (London), Byzantine Empire, Muslim areas of Spain Urban market developed : Exchange of local agriculture and

handicrafts

Historical development of cities

Mercantile cities15th century in EuropeDue to long distance trade and shift of power from feudal lords

to princes, kings and queens.

Industrial revolutionPeriod from 18th to 19th centuryInnovations in manufacturing, transportation and construction

methods: Factory cities; city size incerased.