Friday 31 August 2012

Land values and urban history

Via the Urban Demographics blog, here's a short video of Dr Gabriel Ahlfeldt of the LSE discussing his analysis of a unique dataset of land values in Chicago over time. Apart from looking pretty, this kind of analysis is of great interest to urban economists since land values are both fundamental to understanding cities and very difficult to observe in practice, because the value of land is usually mixed in with the value of structures on it. The data Dr Ahlfeldt analyses manages to separate the two out, allowing us to see how much people are willing to pay for 'pure' location as distinct from whatever happens to be built there.

You can see from the video that land values are very high in Chicago's central business district but then drop off sharply as you move out, a sign that people will pay a very premium to locate their home or workplace (mostly the latter, in this case) in that spot. And as Dr Ahlfeldt says, that particular location has been far more valuable than any other in Chicago for the whole period covered by the data.

So even though vast numbers of boats carrying corn, lumber and pork no longer come and go via Chicago's small harbour on Lake Michigan, the legacy of that waterborne trade and the density of businesses and institutions that built up around it can still be seen in the pattern of industrial and commercial location today. This suggests a very important role for path dependency, history and perhaps chance in explaining urban form.

You can see the whole of Dr Ahlfeldt's lecture and many others at the Lincoln Land Institute here.

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