Capital Shocks and the Great Urban Divide

68 Pages Posted: 22 Mar 2021 Last revised: 14 Jun 2021

See all articles by Michiel N. Daams

Michiel N. Daams

University of Groningen

Philip McCann

affiliation not provided to SSRN

Paolo Veneri

Organization for Economic Co-Operation and Development (OECD)

Richard J. Barkham

University of Reading

Dennis Schoenmaker

affiliation not provided to SSRN

Date Written: March 2, 2021

Abstract

This paper exploits a uniquely-detailed dataset of capital flows into US cities via real estate investments. We identify how places were differently affected by the global financial crisis and provide a powerful explanation of why US economic growth continues to experience ongoing spatial divergence after many decades of convergence. Before the crisis, capital was allocated efficiently across different cities whereas, in terms of pricing and availability, the global financial shock favored large and prosperous cities over smaller and less prosperous cities. In effect, large urban centers become an extension of the bond market, underscoring the capital risk-safety aspects of agglomeration.

Keywords: capital shocks, risks, cities, global financial crisis

JEL Classification: R32, R51, R12, N22, G01

Suggested Citation

Daams, Michiel N. and McCann, Philip and Veneri, Paolo and Barkham, Richard J. and Schoenmaker, Dennis, Capital Shocks and the Great Urban Divide (March 2, 2021). Available at SSRN: https://ssrn.com/abstract=3795957 or http://dx.doi.org/10.2139/ssrn.3795957

Michiel N. Daams (Contact Author)

University of Groningen ( email )

Landleven 1
Groningen, 9747 AD
Netherlands

Philip McCann

affiliation not provided to SSRN

Paolo Veneri

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Richard J. Barkham

University of Reading ( email )

Whiteknights
Reading RG6 6AW, Berkshire
United Kingdom

Dennis Schoenmaker

affiliation not provided to SSRN

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