DP17014 Structural Change, Land Use and Urban Expansion

Author(s): Nicolas Coeurdacier, Florian Oswald, Marc Teignier
Publication Date: February 2022
Date Revised: February 2022
Keyword(s): Land use, Productivity Growth, structural change, urban density
JEL(s): O11, O41, R14
Programme Areas: International Macroeconomics and Finance, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17014

We develop a multi-sector spatial equilibrium model with endogenous land use: land is used either for agriculture or housing. Urban land, densely populated due to commuting frictions, expands out of agricultural land. With rising productivity, the reallocation of workers away from agriculture frees up land for cities to expand, limiting the increase in land values despite higher income and increasing urban population. Due to the reallocation of land use, the area of cities expands at a fast rate and urban density persistently declines, as in the data over a long period. As structural change slows down, cities sprawl less and land values start increasing at a faster rate, as in the last decades. Quantitative predictions of the joint evolution of density and land values across time and space are confronted with historical data assembled for France over 180 years.