Seminar: Urban Economics

Course content

The purpose of this seminar is to give students an insight into the urban economics. Emphasis will be on presenting and discussing the basis urban economic analysis and its use in policy evaluation. The main themes which will be covered in the seminar 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). 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.


MSc programme of Economics
The seminar is primarily for students at the MSc of Economics

Learning outcome
  • 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.

Students are encouraged to write papers in pairs. Ideas for papers:

  • Why cities exist?
  • Urban amenities and the housing prices.
  • Why is housing different?
  • Segregation – consequences or sources of education and crime?
  • The sources of agglomeration economies.
  • Wages, labour supply and commuting.
  • Why do firms cluster?
  • Congestion pricing and the urban structure.

Planning/start-up meeting, research and writing process of the seminar paper, sessions with presentation of own paper and critical evaluation/feedback to another student´s paper, actively participating in discussions at class.

Before the session a "so-finalized-as-possible"-draft of the paper must be uploaded in Absalon. After the presentations, the student submit an edited version of the paper in the Digital Exam portal as the final exam paper. The aim is that students use the presentation sessions as an opportunity to receive and use the constructive feedback to improve the paper.

Brueckner, J. K. 2011. Lectures on urban economics. The MIT Press, Cambridge, Massachusetts, London, England.

Glaeser, E. L. 2008. Cities, Agglomeration and Spatial Equilibrium. Oxford University Press.

O’Sullivan, A. 2012. Urban Economics, (eight edition). McGraw-Hill, Boston, USA.

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.

Schedule: (suggestions)
• Planning meeting: February 8, 2017 at 16.00
• Extra days of teaching/supervision: weeks 7, 8, 14 and 16 (e.g. February 15 and 22, April 5 and 19)
• Presentations/Workshops: weeks 18, 19 and 20 (e.g. May 3, May 10 and May 17)

7,5 ECTS
Type of assessment
Written examination
- seminar paper in English.
All aids allowed
Marking scale
7-point grading scale
Censorship form
External censorship
- up to 20 % censorship
Criteria for exam assessment

The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course and the objectives stated in the Curriculum.

  • Category
  • Hours
  • Seminar
  • 20
  • Project work
  • 186
  • English
  • 206