Three Essays in Urban Economics

This thesis studies the benefits and costs of urban living. Chapter 1 is a theoretical and empirical analysis of the benefits of urban density for consumers, while Chapter 2 proposes a model of how cities enhance the incentives for knowledge diffusion. Chapter 3 investigates the costs of congestion and the determinants of car travel speed across US cities. In Chapter 1, I study the consumption value of urban density by combining Google’s local business data with microgeographic travel data. I show that increased density enables consumers to both realize welfare gains from variety and save time through shorter trips. I estimate the gains from density in the restaurant industry, identifying willingness to pay for access to a slightly preferred location from the extra travel costs incurred to reach it. The results reveal large but very localized gains from density. Increasing the density of destinations generates little reduction in trip times, so most of these gains from density are gains from variety, not savings on travel time. In Chapter 2, I propose a new micro-foundation for knowledge spillovers. I model a city in which uncompensated knowledge transfers to entrepreneurs are bids by experts in auctions for jobs. The model derives from the key ideas about how knowledge differs from other inputs of production, namely that knowledge must be possessed for its value to be assessed, and that knowledge is freely reproducible. Agglomeration economies result from growth in the number of meetings between experts and entrepreneurs, and from heightened competition for jobs among experts. In Chapter 3, written jointly with Gilles Duranton and Matt Turner, we investigate the determinants of driving speed in large US cities. We first estimate city level supply functions for travel in an econometric framework where both the supply and demand for travel are explicit. These estimations allow us to calculate a city level index of driving speed. Our investigation of the determinants of speed provides the foundations for a welfare analysis. This analysis suggests large gains in speed if slow cities can emulate fast cities, and sizable deadweight losses from congestion.Ph