Urban growth and its aggregate implications

That is the title of a new paper by Gilles Duranton and Diego Puga.  This piece goes considerably beyond previous research by having a more explicit model of both urban-rural interactions, and also possible congestion costs arising from more YIMBY.  Here are a few results of the paper:

1. If you restricted New York City and Los Angeles to the size of Chicago, 18.9 million people would be displaced and per capita rural income would fall by 3.6%, due to diminishing returns to labor in less heavily populated areas.

2. The average reduction in real income per person, from this thought experiment, would be 3.4%.  You will note that NIMBY policies are in fact running a version of this policy, albeit at different margins and with a different default status quo point.

3. If you were to force America’s 11 largest cities to be no larger than Miami, real income per American would fall by 7.9%.

4. If planning regulations were lifted entirely, NYC would reach about 40 million people, Philadelphia 38 million (that’s a lot of objectionable sports fans!), and Boston just shy of 30 million (ditto).

5. Output per person, under that scenario, would rise in NYC by 5.7% and by 13.3% in Boston.  That said, under this same scenario incumbent New Yorkers would see net real consumption losses of 13%, whereas for Boston the incumbent losses are only about 1.1%.

6. The big winners are the new entrants.  On average, real income would rise by 25.7%.

7. Alternatively, in their model, rather than laissez-faire, if America’s three most productive cities relaxed their planning regulations to the same level as the median U.S. city, real per capita income would rise by about 8.2%.

8. In all of these cases the authors calculate the change in rural per capita income, based on resulting population reallocations.

Recommended, I am very glad to see more serious work in this area.


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