Economics 590: Applied Urban Economics
University of Illinois, Urbana-Champaign
Spring 2025
Professor David Albouy
Office: 225A David Kinley Hall
Office Hours: Monday 4:00 to 4:50pm (in office); Friday 2:00 to 2:50pm (online)
Email: albouy@illinois.edu
Meeting: Monday and Wednesday: 12:30 to 1:50pm, 215B David Kinley Hall
Description: This course takes a hands-on approach to modeling issues in urban economics using empirical methods. It covers core urban models: spatial equilibrium across and within cities, the monocentric city, neighborhood tipping, housing production, commuting, and local economic development. It focuses on in-depth readings of recent articles involving a range of reduced-form and structural methods. The class will learn to manipulate the data used for those papers, and explore related topics.
Goals of the Course
Ø Deepen understanding of how to approach empirical work scientifically
Ø Develop understanding of data sources, organization, and basic statistics
Ø Develop skills at statistical programming
Ø See pros & cons of reduced-form (show-and-tell) and structural (black box) methods
Ø Develop useful topic-oriented skills for your future research through replication
Grading (100 points)
10% Class Participation We will discuss each paper and empirical discoveries in class. You are expected to contribute to the discussion. It is more important to participate than to not make mistakes. Good questions are as valuable as good answers.
40% Weekly summaries 2 points per paper You must read and summarize the assigned paper(s) before each class. There is no page limit (recommended at least 2), but you should try to condense the most important information in concise, well-written English. Each summary should be divided into four sections. The odd sections should be short; the even ones long.
1) QUESTION: What is (are) the question(s) the paper is trying to answer?
2) METHODOLOGY: What methodology is the author using to address the question? Describe the theory and/or empirical methods.
3) CONCLUSION: What conclusions does the author reach?
4) LIMITATIONS: How are the conclusions sensitive to the methodology used?
40% Empirical Exercises 5 points each These will be a series of questions using data sets from the core articles. These may not be direct replications, but miniature exercises that could explore different angles on the data.
10% Final Exam (at home) An unguided replication of a yet-to-be replicated article
Course Schedule and Readings
*refers to supplemental readings that will be mentioned in class
Jan 22-27: Introduction (questions: 4 points)
Christensen, Garret and Edward Miguel (2018) “Transparency, Reproducibility, and the Credibility of Economics Research.” Journal of Economic Literature, 56(3), pp. 920-980
2019 Methods Lecture, Edward Miguel, "Research Transparency and Reproducibility" https://youtu.be/DRTB_p5jHjo?si=KrHoiUJZGVf6jGw0
*Ioannides, John P.A. (2005) “Why Most Published Research Findings are False” PloS Medicine, 2(8)
*Christensen, Garret, Jeremy Freese, and Edward Miguel (2019) Transparent and Reproducible Social Science Research: How to Do Open Science. Oakland, CA: University of California Press, chapters 1,2,3,4,7,9,10.
Jan 29 – Feb 10: Unit #1 Spatial Equilibrium across Cities and Federal Taxation (questions: 8 points)
Roback, Jennifer (1982) “Wages, Rents, and the Quality of Life.” Journal of Political Economy, 90, pp. 1257-1278.
Albouy, David (2009) “The Unequal Geographic Burden of Federal Taxation.” Journal of Political Economy, 117(4), pp. 635-667.
Albouy, David (2016) “What Are Cities Worth? Land Rents, Local Productivity, and the Total Value of Amenities” Review of Economics and Statistics, 98(3), pp. 477-487.
Albouy, David and Bert Lue (2015) “Driving to Opportunity: Local Rents, Wages, Commuting, and Sub-Metropolitan Quality-of-Life” Journal of Urban Economics, 2015, 89, pp. 74-92.
*Rosen, Sherwin (1979) “Wages-based Indexes of Urban Quality of Life” P. Mieszkowski and M. Straszheim, eds. Current Issues in Urban Economics, Baltimore: John Hopkins Univ. Press.
*Albouy, David, Walter Graf, Ryan Kellogg, Hendrik Wolff (2016) “Climate Amenities, Climate Change, and American Quality of Life.” Journal of the Association of Environmental and Resource Economists. 3(1), pp. 205-246.
*Sinha Paramita, Martha L. Caulkins, and Maureen L. Cropper (2018) “Household Location Decisions and the Value of Climate Amenities” Journal of the Environmental Economics and Management. 92, pp. 608-637
*Lemieux, T. (2006). The “Mincer Equation” Thirty Years After Schooling, Experience, and Earnings. In: Grossbard, S. (eds) Jacob Mincer A Pioneer of Modern Labor Economics. Springer, Boston, MA.
Feb 12- Feb 24: Unit #2 Monocentric City Model and Shrinkage (questions: 4 points)
Walters, Christopher W. (2024) “Empirical Bayes Methods in Labor Economics” NBER Working Paper
Albouy, David; Gabriel Ehrlich, and Minchul Shin (2018) “Metropolitan Land Values” Review of Economics and Statistics. 100(3), pp. 454-466.
*Combes, Pierre-Philippe, Gilles Duranton, and Duranton Gobillon, (forthcoming) “The Costs of Agglomeration: House and Land Prices in French Cities” Review of Economic Studies
Feb 26- Mar 5: Unit #3 Housing Production and Land-Use Restrictions (questions: 4 points)
Gyourko, Joseph, Jonathan S. Hartley, and Jacob Krimmel. (2021) “The Local Residential Land Use Regulatory Environment across U.S. Housing Markets: Evidence from a New Wharton Index” Journal of Urban Economics, 124.
Albouy and Ehrlich (2018) “Housing Productivity and the Social Cost of Land-Use Regulations” Journal of Urban Economics, 107 101-120.
*Saiz, Albert (2010) “The Geographic Determinants of Housing Supply” Quarterly Journal of Economics 125(3), pp. 1253-96.
*Davidoff, Thomas (2016) "Supply Constraints Are Not Valid Instrumental Variables for Home Prices Because They Are Correlated With Many Demand Factors", Critical Finance Review
*Bartik, Alex, Arpit Gupta and Daniel Milo (2024) “The Costs of Housing Regulations: Evidence from Generative Regulatory Measurement”
*Mast, Evan (2024), “Warding off Development: Local Control, Housing Supply, and NIMBYs” Review of Economics and Statistics.
Mar 10 – Mar 24: Unit #4 Shift Share Instruments and the Local Labor-Market Shocks (questions: 4 points)
Borusyak, Kirill, Peter Hull, and Xavier Jaravel (2024) “A Practical Guide to Shift Share Instruments” NBER Working Paper No. 32326
Autor, David H., David Dorn, and Gordon H. Hanson (2013) “The China Syndrome: Local Labor Market Effects of Import Competition in the United States.” American Economic Review 103, pp. 2121-68.
*Goldsmith-Pinkham, Paul, Isaac Sorkin, Henry Swift (2018) “Bartik Instruments: What, When, Why, and How” NBER Working Paper 24408
Mar 26 – Apr 2: Unit #5 Heterogeneous Workers and Amenities
Black, Dan Gary Gates, Seth Sanders, and Lowell Taylor (2002) “Why Do Gay Men Live in San Francisco” Journal of Urban Economics, 51(1), pp.
Diamond, Rebecca (2016) “The Determinants and Welfare Implications of US Workers Diverging Location Choices by Skill: 1980-2000.” American Economic Review 106(3), pp. 479-524
*Moretti, Enrico (2013) “Real Wage Inequality” American Economic Journal: Applied Economics, 5(1), pp. 65-103
*Black, Dan, Natalia Kolesnikova and Lowell Taylor (2009) “Earnings Functions when Wages and Prices Vary by Location” Journal of Labor Economics, 27(1), pp. 27-49.
Apr 7 – Apr 14: Unit #6, Taxation (questions: 4 points)
Tiebout, Charles M. (1956) “A Pure Theory of Local Public Expenditures” Journal of Political Economy, 64, pp. 416-424.
Suarez-Serrato, Juan Carlos and Owen Zidar (2016) “Who Benefits from State Corporate Tax Cuts? A Local Labor Markets Approach with Heterogeneous Firms, American Economic Review 106(9), pp. 2582-2642
* Agrawal, David R., William H. Hoyt, and John D. Wilson. 2022. "Local Policy Choice: Theory and Empirics." Journal of Economic Literature, 60 (4): 1378–1455.
Apr 16 – Apr 23: Unit #7 Agglomeration and Quantitative Spatial Models (questions: 4 points)
Allen, Treb and Costas Arkolakis (2023) “Economic Activity across Space: A Supply and Demand Approach” Journal of Economic Perspectives 37(2), pp. 3-28.
Ahlfeldt, Gabriel M., Stephen J. Redding, Daniel M. Sturm and Nikolaus Wolf, (2015) "The Economics of Density: Evidence From the Berlin Wall," Econometrica, 83, pp. 2127-2189
*Severen, Christopher (2019) “Commuting, Labor, and Housing Market Effects of Mass Transportation: Welfare and Identification,” Review of Economics and Statistics
Apr 28 – May 5: Unit #8 Immigration and Local Housing and Labor Markets (questions: 4 points)
Saiz, Albert, (2007) “Immigrants and Housing Rents in American Cities” Journal of Urban Economics 61, pp. 345-371.
Albert, Christoph, and Joan Monras. (2022). "Immigration and Spatial Equilibrium: The Role of Expenditures in the Country of Origin." American Economic Review, 112 (11): 3763–3802.
May 7: Last Day
FINAL EXAM Open Replication/Class Project
Organizational Meeting Friday, May 9 1:30-4:30pm
Final due date: Thursday, May 15 at 11:59pm.