AbstractThis paper studies the urban structure of Detroit—one that is clearly not optimal for its size—which features a business district immediately surrounded by largely vacant neighborhoods. A model is presented where residential externalities lead to multiple equilibria at the neighborhood level. Specifically, neighborhood development requires the coordination of developers and residents, without which it may remain vacant even with sound fundamentals. Given this mechanism, existing strategic visions to revitalize Detroit are evaluated within a quantitative spatial model that can rationalize Detroit's current allocations. Alternative plans that rely on "development guarantees" are also considered and shown to yield better outcomes.
CitationOwens, Raymond III, Esteban Rossi-Hansberg, and Pierre-Daniel Sarte. 2020. "Rethinking Detroit." American Economic Journal: Economic Policy, 12 (2): 258-305. DOI: 10.1257/pol.20180651
- D62 Externalities
- R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
- R32 Other Spatial Production and Pricing Analysis
- R58 Regional Development Planning and Policy