by topics

Topic: Urban economic studies


Agglomeration economies

Agglomeration economies refer to ‘the benefits that come when firms and people locate near one another together in cities and industrial clusters’ (Glaeser, 2010, p.1).


Backyard Production Model

A model with the assumption of equal productivity, constant returns to scale in exchange and constant returns to scale in production. In the model, every consumer is a producer and they will be self-sufficient by producing everything they consume. (O’Sullivan, 2012, p.17-18)


Bid rent

The amount land users are willing to pay for land on the basis of its distance from the Central Business District in a given city (O’Sullivan, 2012, p.128-130).


Common goods

‘Common pool resources (CPRs) or commons, which are non-excludable but subject to rivalry, such as fisheries, free meadows, hunting game, and groundwater basins.’ ... ‘For goods with the rivalry attribute, a unit of CPR taken by one person is taken away from another person. For goods with the non-excludability attribute, no one can singularly claim property rights.’ (Martelli, 2011)


Comparative advantage

A region may be producing a particular product with a lower opportunity cost. This may lead to specialization and trade. (O'Sullivan, 2012, p.18-19)


Density gradient

The density gradient is defined as ‘percentage change in density per additional mile from the city center.’ (O'Sullivan, 2012, p.170)


Distribution cost

‘The cost of transporting the firm’s output from the production facility to the output market.’ (O'Sullivan, 2012, p.38)


Edge cities

The recent suburban development that emphasises producing office and retail space. (O'Sullivan, 2012, p.166-167)


Hedonic house pricing model

‘The price or value of the housing unit is determined by various attributes of the housing unit, for example, its location, size, or age. The hedonic model measures the implicit price of each attribute by a comprehensive function.’ (O'Sullivan, 2012, p.143)


Index of dissimilarity

A demographic measure of the degree of segregation or diversity within each of a set of areas. The measure is higher if the areas have ethnic segregation, and the index declines if people of type I move to an area with lower concentration of their ethnicity. (Elliot, Fairweather, Olsen & Pampaka, 2016)


Knowledge spillovers

‘The physical proximity (cluster) that facilitates exchange of knowledge between people, leading to new ideas.’ (O'Sullivan, 2012, p.61)


Laboratory cities

The role of cities in innovation and production. Firms experiment with different production process until they find the ideal one. At that point, the firm will switch to mass production and start earning a profit. (O'Sullivan, 2012, p.76)


Localization economies

Agglomeration economies experienced within a particular industry. These localization economies generate clusters of firms producing same product. (O'Sullivan, 2012, p.60)


Marginal rate of substitution (MRS)

 MRS is ‘the rate at which a consumer is willing to trade one good for another’ (Mankiw, 2012, p. 492). It is ‘a consumer’s own trade-off’. (O'Sullivan, 2012, p. 157)


Marginal rate of technical substitution (MRTS)

‘The analog of the marginal rate of substitution.’ (O'Sullivan, 2012, p.160) ‘MRTS is the amount by which the quantity of one input has to be reduced when one extra unit of another input is used, so that output remains constant.’ (Mas-Colell et al., 1995).


Marginal return of labour

Physically (MPL), it means ‘the change in output that results from employing an added unit of labour’. In terms of revenue (Value of marginal product of labour; VMPL), it means ‘the marginal revenue product of labor is the change in revenue that results from employing an additional unit of labour.’ (Lumen Learning & Boundless Economics, n.d.)


Market-oriented industry

‘An industry in which the cost of transporting output is large relative to the cost of transporting inputs.’ (O'Sullivan, 2012, p.29)


Materials-oriented industry

‘An industry for which the cost of transporting material inputs is large relative to the cost of transporting output.’ (O'Sullivan, 2012, p.29)


Minimum lot size zoning

Some local governments use minimum lot size zoning. A minimum lot size for residential development outlaws higher density and, encourages income segregation and so do other policies such as the prohibition of multifamily units, maximum densities, requirements for two-car garages, and development fees. (O'Sullivan, 2012, pp.214-222)


Principal city

‘The largest municipality in each metropolitan or micropolitan statistical area.’ (O'Sullivan, 2012, p.3)


Private goods

Public goods refer anything that rivals and is excludable in consumption. Since it is rivalry in consumption, it has finite availability, in which individual consumption will decrease the availability of the good to other consumers. Also, due to its excludability in consumption, it can only be used, or consumed, by one party at the same time. (Chen, 2019)


Public goods

‘Pure public goods have two defining features. One is “non‐rivalry,” meaning that one person’s enjoyment of a good does not diminish the ability of other people to enjoy the same good. The other is “non‐excludability,” meaning that people cannot be prevented from enjoying the good’. (Kotchen, 2012, p.1)


Spatial mismatch

‘First advanced by Kain (1968), the spatial mismatch hypothesis argues that black access to employment has been adversely affected by the tendency for jobs in urban areas to shift toward locations distant from black residential centers. The idea is that because racial residential segregation has continued to dis- proportionately concentrate blacks in inner-city ghettos and because blacks have inferior access to automobiles, they'are less capable than whites of physically reaching suburban jobs and are thus more subject to unemployment.’ (Cohn & Fossett, 1996, p.557)


Tiebout model

Households will sort themselves into municipalities according to their ideal level (demand) for local public good. Assumptions include: perfect information and mobility, no externalities, no economies of scale, head taxes finance and local public good. (O’Sullivan, 2012)


Urban growth boundary

An urban growth boundary (UGB) separates urban areas from the surrounding natural and agricultural lands, or greenbelts. It puts a limit on how far out the city can expand. (Tang, 2016)


Urban sprawl

‘The spread or increase of low-density, automobile-dependent built environment around existing urban areas, generally with the implication that this process is unplanned or uncontrolled.’ (Rogers, Castree & Kitchin, 2013, p.100)


Urbanization economies

‘Agglomeration economies that cross industry boundaries - firms of different industries to locate close to one another.’ (O’Sullivan, 2012, p.60)


Willingness to pay (WTP)

‘The maximum amount that an economic agent is willing to pay to acquire a specified good or service. The willingness to pay is private information but may be obtained by using revealed preference techniques or the contingent valuation method.’ (Black, Hashimzade & Myles, 2012)

Reference List

Black, J., Hashimzade, N., & Myles, G. (2012). Willingness to pay. A Dictionary of Economics. Retrieved from

Chen, J. (2019). Private Good. In Investopedia. Retrieved from:

Cohn, S. & Fossett, M. (1996). What Spatial Mismatch? The Proximity of Blacks to Employment in Boston and Houston. Social Forces, 75(2), 557-573.

Elliot, M., Fairweather, I., Olsen, W., & Pampaka, M. (2016). index of dissimilarity. In A Dictionary of Social Research Methods.: Oxford University Press.

Glaeser, E.L. (2010). Agglomeration Economics. Chicago: University of Chicago Press.

Kotchen, Matthew. (2012). Public Goods. A draft chapter prepared for Environmental and Natural Resource Economics: An Encyclopedia, J. Whitehead and T. Haab (eds.), forthcoming, Santa Barbara, CA: ABC‐CLIO, Inc. 1-3.

Lumen Learning & Boundless Economics. (n.d.). Demand for Labour. Retrieved from

Mankiw, N. G. (2012). Principles of Microeconomics. 6th ed. Mason, OH: South-Western Cengage Learning.

Martelli, P. (2011). Common Goods. In B. Badie, D. Berg-Schlosser, & L. Morlino (Eds.), International Encyclopedia of Political Science (Vol. 2, pp. 307-310). Thousand Oaks, CA: SAGE Reference.

Mas-Colell, A, Whinston, M., Green, J. (1995). Microeconomic Theory. Oxford: Oxford University Press.

O’Sullivan, A. (2012). Urban economics (8th ed.). New York, NY: McGraw-Hill/Irwin.

Rogers, Castree & Kitchin. (2013). Urban Sprawl. A Dictionary of Human Geography.

Tang, K. A. (2016). “What Are Urban Growth Boundaries and Why Do We Need Them?”. Greenbelt alliance. Retrieved from