Who Gets the Urban Surplus?

19 Pages Posted: 2 May 2017

See all articles by Paul Collier

Paul Collier

University of Oxford

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

Date Written: April 2017

Abstract

High productivity in cities creates an economic surplus relative to other areas. How is this divided between workers and land-owners? Simple models with homogenous labour suggest that it accrues largely - or entirely - in the form of land-rents. This paper shows that heterogeneity of labour in two main dimensions (productivity differentials and housing demands) radically changes this result. Even a modest amount of heterogeneity can drive the land share of surplus down to 2/3rds or lower, as high productivity and/or low housing demand individuals receive large utility gains. In a system of cities the sorting of workers across cities mean that the land-rent share of surplus is lowest in the largest and most productive cities.

Keywords: cities, Land rent, productivity, sorting, wages

JEL Classification: R1, R10, R2

Suggested Citation

Collier, Paul and Venables, Anthony J., Who Gets the Urban Surplus? (April 2017). CEPR Discussion Paper No. DP12001. Available at SSRN: https://ssrn.com/abstract=2961764

Paul Collier (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Anthony J. Venables

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
326
PlumX Metrics