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Title: Rethinking Detroit

Author(s): Raymond Owens, Esteban Rossi-Hansberg and Pierre-Daniel Sarte

Publication Date: February 2017

Keyword(s): cities, Manufacturing, Revitalization, Rustbelt, Urban Decline and urban structure

Programme Area(s): International Trade and Regional Economics

Abstract: We study the urban structure of the City of Detroit. Following several decades of decline, the city's current urban structure is clearly not optimal for its size, with a business district immediately surrounded by a ring of largely vacant neighborhoods. We propose a model with residential externalities that features multiple equilibria at the neighborhood level. In particular, developing a residential area requires the coordination of developers and residents, without which it may remain vacant even if its fundamentals are sound. We embed this mechanism in a quantitative spatial economics model and use it to rationalize current city allocations. We then use the model to evaluate existing strategic visions to revitalize Detroit, and to design alternative plans that rely on `development guarantees' to yield better outcomes. The widespread effects of these policies underscore the importance of using a general equilibrium framework to evaluate policy proposals.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11828

Bibliographic Reference

Owens, R, Rossi-Hansberg, E and Sarte, P. 2017. 'Rethinking Detroit'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11828