Central Cities and Suburbs: Economic Rivals or Allies?

This is the title of a very nice manuscript by Michael Hollar in the forthcoming issue of the Journal of Regional Science.

His question has been playing on my mind recently as various urbanists have crowed with delight on the decline of suburbs with the housing collapse. (That this decline actually involves human suffering is irrelevant: those homeowners are, of course, merely vacuous yuppies who should have done the morally right thing and had the sense to have money for their housing in the Upper east side and the Hamptons or Cape.)

To anybody that actually thinks about it, Hollar’s finding is pretty obvious, though the question has torn up the research in economic development in the past decades. Strong suburbs do not necessarily mean a weak downtown, nor vice versa, and regions that show evidence of either are economically less productive than places that have both strong suburbs and downtowns. The relationship he models is remarkably symmetric; one isn’t the necessary condition to the other’s growth in terms of exports or product.

The real contribution here is the research design and the model which help us nail down the considerable identification problems here: he develops export price indexes to look for shocks in either of the geographic locales and then measures responses in the paired geography.

It would be interesting to disaggregate the geography a little more than he does.