Central Cities and Suburbs: Economic Rivals or Allies?

Author: Michael Hollar

Dissertation School: George Washington University

Abstract:

The shift of employment from center cities to suburbs during the past 4 decades has opened a debate on the effect of urban decline on suburban communities. Does urban decline slow suburban growth (the complementary view) or do suburban jurisdictions gain at urban centers' expense (the rivalrous view)? To date, suburban communities have generally resisted regional efforts to subsidize growth within their central cities. Has this resistance harmed suburban communities? This dissertation examines the economic interdependence between central cities and suburbs and measures the degree to which suburban communities are harmed by urban decline.

My research will examine the economic interdependence of central cities and suburbs both theoretically and empirically. The theoretical section will bridge the gap between two divergent groups of models: urban growth and urban simulation models. Urban growth models emphasize urbanization economies at the metropolitan level, and generally conclude that center cities and suburbs grow together—the complementary view. Urban simulation models, such as Sullivan (1986), emphasize localization economies and generally find that center city decline aids suburban growth by lowering suburban labor costs. My research will modify Sullivan's urban model to include both urbanization and localization economies, to determine the circumstances under which simulation models can produce a positive, complementary relationship between central cities and their suburbs.

My empirical research will test whether center cities and their suburbs are economic allies or rivals. Existing studies, most recently Chang and Coulson (2001), have produced limited evidence for a small number of cities supporting a complementary relationship. The testing in my proposed study goes well beyond the current literature by considering a large panel of cities and using an index of export industry prices (goods exported from the metropolitan area) to measure exogenous demand shocks to the city economy. Pennington-Cross (1997) developed an indicator of external demand shocks at the metropolitan level called the Export Price Index (EPI).

My research will construct this index separately for central cities and suburbs. This index will then be used to measure the effects of exogenous demand shocks to the center city economy on economic development in the suburbs and vice versa. For example, the test will determine if, and to what extent, a positive demand shock to the center city economy causes economic growth in the suburbs. If I determine that positive demand shocks to the center city result in additional suburban growth, this is direct evidence that center city and suburban growth are complementary. It is also indirect evidence that urbanization economies are more important than localization economies.

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