Do Suburbs Need Cities?

Abstract

In this paper I examine the relationship between city and suburbangrowth over the last three decades for a sample of U.S. metropolitan areas. I develop a structuralempirical model relating city income growth to suburban growth in income, population, andhouse values. The model allows for bidirectional effects of cities on suburbs and suburbs oncities, as well as for unobserved factors affecting both city and suburbs. The simultaneous,latent‐variable model is identified using a combination of exclusion and covariance restrictions.Instrumental estimation results indicate that income growth in large cities enhances suburbangrowth; but income growth in small cities has little effect.