Esteban Rossi-Hansberg, Princeton University
Presenter: Esteban Rossi-Hansberg, Princeton University
Paper: Rethinking Detroit
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 largely empty ring of 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 yield better outcomes by way of 'development guarantees'. The widespread effects of these policies underscore the importance of using a general equilibrium framework to evaluate policy proposals.
The International Economics Seminar series is presented jointly with the Walsh School of Foreign Service and the Economics Department of Georgetown University.