Three Essays on Urban Economics: Wage Inequality, Urban Sprawl, and Labor Productivity

by Fallah, Belal

The thesis consists of three essays on urban economies. The first essay investigates the relationship between proximity to larger markets and wage distribution within local labor markets. In this essay I derive a theoretical spatial skill demand equation that positively links skill premiums to market access. Using data from U.S. metropolitan areas, I provide evidence that while average wages are higher in metropolitan areas with higher market access, as suggested in the existing literature, the wage differential is unequally distributed across the metropolitan workers. That is, greater access to markets is linked to relatively weaker outcomes for those at the bottom of the wage distribution.

The second essay examines the extent of urban sprawl with respect to the volatility of local economies. Specifically, it investigates how uncertainty over future land rents explains changes in the extent of urban sprawl. To theoretically study this relationship, I develop a theoretical model that links sprawl to shocks to changes in land development rent, among other factors. The econometric analysis draws upon panel data from U.S. metropolitan areas over the 1980-2000 censuses. To measure urban sprawl, I construct a distinctive measure that better captures the distribution of population density within metropolitan areas. Using suitable proxy that accounts for uncertainty over future land rents, I provide robust evidence confirming the theoretical prediction. That is, metropolitan areas with higher levels of uncertainty have a lower level of sprawl.

Finally, the third essay uses theories from urban production economics to empirically investigate the relationship between the economic performance of U.S. metropolitan areas and their respective amounts of sprawl. Specifically, this essay provides a comprehensive empirical analysis on the impact of urban sprawl on labor productivity. The main finding suggests that higher levels of urban sprawl are negatively associated with average labor productivity. Interestingly, this negative association is even stronger in smaller metropolitan areas. Still, there is evidence that the significance of the negative impact of sprawl is not homogenous across major industries.