DP13440 The economic effects of density: A synthesis

Author(s): Gabriel Ahlfeldt, Elisabetta Pietrostefani
Publication Date: January 2019
Keyword(s): city, Compact, density, Elasticity, meta-analysis, present value
JEL(s): R38, R52, R58
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13440

This paper synthesises the state of knowledge on the economic effects of density. We consider 15 outcome categories and 347 estimates of density elasticities from 180 studies. More than 100 of these estimates have not been previously published and have been provided by authors on request or inferred from published results in auxiliary analyses. We contribute own estimates of density elasticities of 16 distinct outcome variables that belong to categories where the evidence base is thin, inconsistent or non-existent. Along with a critical discussion of the quality and the quantity of the evidence base we present a set of recommended elasticities. Applying them to a scenario that roughly corresponds to an average high-income city, we find that in per-capita present value terms (at a 5% discount rate), a 1%-increase in density implies an increase in wage and rent of $280 and $347. The decrease in real wage net of taxes of $156 is partially compensated for by an aggregate amenity effect of $100 and there is a positive external welfare effect of $60.