Brookings: Experts - Janet Rothenberg Pack

Brookings-Wharton Papers on Urban Affairs: 2008

Gary Burtless and Janet Rothenberg Pack, eds. — Thu, 16 Oct 2008 12:00:00 -0400

Brookings Institution Press 2008 293pp.

Designed to reach a wide audience of scholars and policymakers, the Brookings-Wharton Papers on Urban Affairs is an annual series that serves as a forum for cutting-edge, accessible research on urban policy. The editors seek to integrate broader research into the urban policy discussion by bringing urban studies scholars together with economists and researchers studying subjects with important urban implications. Contents include: • Toward a Comprehensive Assessment of Road Pricing Accounting for Land Use Ashley Langer (University of California– Berkeley) and CliffordWinston (Brookings) • Prospects for Urban Road Pricing in Canada Robin Lindsey (University of Alberta) • Resurrecting the National Housing Market: Reassessing the Role of National and Local Shocks in Metropolitan Area Housing Markets Raven E. Saks (Federal Reserve Board of Governors) •Neighborhoods, Economic Self- Sufficiency, and the MTO John Quigley and Steven Raphael (University of California–Berkeley) • London Congestion Charging Georgina Santos (University of Oxford) •Antitrust Implications of Home Seller Outcomes When Using Flat-Fee Real Estate Agents Steven D. Levitt and Chad Syverson (University of Chicago)

ABOUT THE EDITORS

Gary Burtless

Janet Rothenberg Pack

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Brookings-Wharton Papers on Urban Affairs: 2007

Gary Burtless and Janet Rothenberg Pack, eds. — Wed, 01 Aug 2007 00:00:00 -0400

Brookings Institution Press 2007 250pp.

In this issue, six papers on urban economics address a wide range of issues:

the impact of business improvement districts on commercial property values;
the impact of lost steel and auto jobs in cities and counties in the early 1980s;
the role of government-sponsored enterprises in providing financial support for U.S. housing;
the way GSEs affect mortgage rates and market liquidity;
effects on lower-income, underserved housing markets of the affordable housing goals set by GSEs;
the impact of terrorism on urban form since 1990.

ABOUT THE EDITORS

Gary Burtless

Janet Rothenberg Pack

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Brookings-Wharton Papers on Urban Affairs: 2006

Gary Burtless and Janet Rothenberg Pack, eds. — Wed, 01 Nov 2006 00:00:00 -0500

Brookings Institution Press 2006 258pp.

In this issue, six papers on urban economics address a wide range of issues:

Editors' Summary (Full Text)

Metropolitan Growth, Inequality, and Neighborhood Segregation by Income (Abstract)
Tara Watson

Differentiated Road Pricing, Express Lanes, and Carpools: Exploiting Heterogeneous Preferences in Policy Design (Abstract)
Kenneth A. Small, Clifford Winston, and Jia Yan

Understanding Trends in the Black-White Achievement Gaps during the First Years of School (Abstract)
Richard J. Murnane, John B. Willett, Kristen L. Bub, and Kathleen McCartney

Neighborhood Effects on Barriers to Employment: Results from a Randomized Housing Mobility Experiment in Baltimore (Abstract)
Kristin Turney, Susan Clampet-Lundquist, Kathryn Edin, Jeffrey R. Kling, and Greg J. Duncan

Effects of Property Taxation on Development Timing and Density: Policy Perspective (Abstract)
Richard Arnott

Sprawl and Jurisdictional Fragmentation (Abstract)
Edwin S. Mills

ABOUT THE EDITORS

Gary Burtless

Janet Rothenberg Pack

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Brookings-Wharton Papers on Urban Affairs: 2005

Gary Burtless and Janet Rothenberg Pack, eds. — Thu, 01 Dec 2005 00:00:00 -0500

Brookings Institution Press 2005 303pp.

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Contents for this volume include:

Editors' Summary (Full Text)

Looking Back to Look Forward: Learning from Philadelphia's 350 Years of Urban Development (Abstract)
Joseph Gyourko (University of Pennsylvania)

Property Tax Limitations and Mobility: Lock-in Effect of California's Proposition 13 (Abstract)
Nada Wasi (University of California—San Diego) and Michelle J. White (Brown University)

Higher Education Appropriations and Public Universities: Role of Medicaid and the Business Cycle (Abstract)
Thomas J. Kane (University of California—Los Angeles), Peter R. Orszag (Brookings Institution), and Emil Apostolov (Brookings Institution)

Effects of Urban Rail Transit Expansions: Evidence from Sixteen Cities, 1970-2000 (Abstract)
Nathaniel Baum-Snow (University of Chicago) and Matthew E. Kahn (Tufts University)

Migration within the United States: Role of Race-Ethnicity (Abstract)
William H. Frey (University of Michigan) and Kao-Lee Liaw (McMaster University)

Growth of China's Medium-Size Cities (Abstract)
J. Vernon Henderson (Brown University)

ABOUT THE EDITORS

Gary Burtless

Janet Rothenberg Pack

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Sunbelt/Frostbelt : Public Policies and Market Forces in Metropolitan Development

Janet Rothenberg Pack, ed. — Fri, 01 Apr 2005 00:00:00 -0500

Brookings Institution Press 2005 232pp.

Metropolitan growth and development results from a complex mix of factors: for example, rising incomes, shifting populations, consumer preferences and market restructuring, the quality of schools, the location of affordable housing, and the natural topography of a metropolitan area. Yet major federal and state spending programs, tax expenditures, and regulatory and administrative policies can also fundamentally shape growth patterns.

Sunbelt/Frostbelt examines the role of government policies and market forces in shaping growth patterns in five metropolitan areas: Chicago, Los Angeles, Philadelphia, Phoenix, and Pittsburgh. It concludes with a look at how these different areas have tried to put in place policy reforms to address their unique growth challenges.

Contributors include a team of researchers from Arizona State University, Peter Dreier (Occidental College), Robert E. Gleeson (Northern Illinois University), Joseph Gyourko (University of Pennsylvania), Pascale Joassart-Marcelli (University of Massachusetts, Boston), Manuel Pastor Jr. (University of California, Santa Cruz), Jerry R. Paytas (Carnegie Mellon University), Joseph Persky and Kimberly Schaffer (University of Illinois at Chicago), Anita A. Summers (University of Pennsylvania), Wim Wiewel (University of Baltimore), and Jennifer Wolch (University of Southern California).

ABOUT THE EDITOR

Janet Rothenberg Pack

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Brookings-Wharton Papers on Urban Affairs: 2004

Janet Rothenberg Pack and William G. Gale, eds. — Tue, 22 Jun 2004 00:00:00 -0400

Brookings Institution Press 2004 305pp.

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The six papers in this issue address a variety of topics in urban economics.

Contents include:

Editors' Summary (Full Text)

The Labor Market Effects of the 1960s Riots (Abstract)
William J. Collins and Robert A. Margo

The Rise of the Skilled City (Abstract)
Edward L. Glasser and Albert Saiz

School Funding Equalization and Residential Location for the Young and the Elderly (Abstract)
Christian A.L. Hilber and Christopher J. Mayer

The Anatomy of Rent Burdens: Immigration, Growth, and Rental Housing (Abstract)
Erica Greulich, John M. Quigley, and Steven Raphael

The Effect of Prison Releases on Regional Crime Rates (Abstract)
Steven Raphael and Michael A. Stoll

Who Benefits Whom in Local Television Markets?
Joel Waldfogel

ABOUT THE EDITORS

Janet Rothenberg Pack

William G. Gale

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Brookings-Wharton Papers on Urban Affairs: 2003

Janet Rothenberg Pack and William G. Gale, eds. — Tue, 26 Aug 2003 00:00:00 -0400

Brookings Institution Press 2003 250pp.

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Designed to reach a wide audience of scholars and policymakers, this series contains studies on urban sprawl, crime, taxes, education, poverty, and related subjects.

"This journal will set the tone for urban economics for the coming decades. It will play a major role not only in academia, but also in ensuring that we have better urban economic policy."—George Akerlof, University of California, Berkeley

Contents include:

Editors' Summary (Full Text)

The Geography of Inequality in the United States, 1950-2000
Douglas S. Massey and Mary J. Fischer (University of Pennsylvania)

Getting Inside Accountability: Lessons from Chicago
Brian A. Jacob (Kennedy School of Government)

School Accountability Ratings and Housing Values
Thomas J. Kane, Douglas O. Staiger, and Gavin Samms

Public School Finance and Urban School Policy: General vs Partial Equilibrium Analysis
Thomas Nechyba

Catching Cheating Teachers: The Results of an Unusual Experiment in Implementing Theory
Brian A. Jacob and Steven D. Levitt

Local Variation in Land Use Regulations
Bengte Evenson and William C. Wheaton

ABOUT THE EDITORS

Janet Rothenberg Pack

William G. Gale

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An Economic Perspective on Urban Education

Janet Rothenberg Pack, Meghan McNally and William G. Gale — Sun, 01 Jun 2003 00:00:00 -0400

Participants in the annual symposium on The Brookings-Wharton Papers on Urban Affairs—convened by Brookings and the University of Pennsylvania’s Wharton School—present research on issues unique to urban areas as well as on broader economic and policy topics that can apply to urban settings. This year’s participants focused on urban education and presented findings on the results of an experiment designed to detect cheating on standardized tests, the impact of school reform in an urban setting, the effect of school quality on housing values, and the determinants of improved academic performance. Two other studies addressed other urban economic issues: the increase in economic inequality across and within geographic regions, and local variation in land-use regulations. This year’s Brookings-Wharton symposium took place at Brookings in October 2002. The resulting bound volume is due out this month from the Brookings Institution Press.

Symposium on Urban Education

Education is one of the most important services provided by urban and local governments. But low test scores, high dropout rates, high teacher turnover rates, and other problems show that large urban school districts in the United States serve their students poorly. These deficiencies have led affluent families to leave cities for the suburbs or to move their children to private schools. When these families move, urban tax bases and economic activity are reduced. When good students move to private schools, the average academic quality of the remaining public school students declines, which can reduce the quality of the education received in the public schools through its influence on peer group effects and expenditure on schools. For all of these reasons, education reform has emerged as a key issue in urban areas.

Catching Cheating Teachers

One approach to improving urban schools involves increased emphasis on high-stakes testing, under which schools are held accountable, through a variety of sanctions, for their students? failure to exceed the thresholds on standardized tests. Supporters claim that testing provides accountability and raises test scores. Critics note that test score gains have been shown to be test-specific and thus may be ephemeral. Another concern is that the emphasis on high-stakes testing may increase the temptation for students, teachers, and administrators to cheat on standardized tests.

Brian A. Jacob of Harvard University and Steven D. Levitt of the University of Chicago examine cheating by teachers using a methodology they developed in previous work. Roughly 100,000 Chicago public school students take the Iowa Test of Basic Skills each spring, with retesting in 117 classrooms three to four weeks later. Jacob and Levitt analyze these results, controlling for past, current, and retest scores, demographics, and socioeconomic characteristics as explanatory variables to identify suspicious answer strings (see figure 1). The authors look at cheating in three types of classrooms:

Classrooms with unusually large test score gains and highly suspicious patterns of answer strings
Classrooms with suspicious answer strings but without unusually large test score gains
Classrooms with anonymous allegations of cheating

The authors compare the retest performance of these classrooms to two control groups that are not suspected of cheating: one group with large test score gains but no suspicious answer strings, and one group chosen at random.

The main result is that classrooms that were suspected of cheating saw dramatic declines in test results in the retest relative to the original test, while the control classrooms saw little change in test results. Out of the approximately seventy suspicious classrooms that were retested, nearly all experienced test score declines that were significant. In addition, after the retest, school administrators in two schools were suspected of complicity in cheating because of the large number of classes in their schools identified as having cheated. Consequently, both the teachers and administrators suspected of cheating were subject to further investigation.

Public School Finance and Urban School Policy

Much of the analysis of school quality determinants focuses narrowly on the effects of financial resources on school performance. In contrast, Thomas Nechyba of Duke University explores how financing alters school quality in a framework that explicitly incorporates the fact that financing changes may alter the characteristics of neighborhoods, private school attendance rates, and political voting outcomes. He develops these insights in a simulation model calibrated to data from New Jersey. By examining the various policies in a single, consistent model, he is able to isolate the interlocking roles of different factors in determining the impact of changes in school finance. Nechyba examines the effects of centralizing school finance, changing state aid formulas, and issuing state-funded vouchers. A major result of Nechyba's analysis is that the indirect effects of policy changes on school quality—for example, those that arise from households moving or students changing from public to private schools—often have a greater impact on school performance than the direct effects of funding levels and the availability of resources.

Among the specific results: centralizing school finance raises housing prices, reduces private school attendance, reduces spending per pupil in public schools, and narrows school quality differences across districts. Funding formulas that provide state aid not targeted at poor school districts result in school improvement in wealthy districts and also cause larger inequalities across districts. However, targeted state aid administered only to poor school districts achieves greater increases in school quality for all schools. State-funded vouchers reduce quality at poor-performing public schools as students choose to attend better public and private schools. At the same time, families in wealthier neighborhoods move to areas with more affordable housing and send their children to private schools using vouchers. As a result, overall school quality in poor districts rises slightly because of the increased quality of the new private schools. Vouchers have a negative impact on the public schools in wealthier districts as affluent families move out, causing a decline in quality and support of the public schools.

School Accountability Ratings and Housing Values

Previous research has found that there is a strong connection between student test scores at neighborhood schools and housing values at a point in time, but there is less evidence on how those variables evolve over time. This issue, however, will become more important in the future, because the No Child Left Behind Act of 2001 requires states to test all students in grades three through eight and publicly report the results.

Thomas J. Kane of UCLA, Douglas O. Staiger of Dartmouth College, and Gavin Samms of Harvard University evaluate the effects on housing values of test scores and composite school ratings. Using data on the sales prices of homes in Mecklenburg County, North Carolina, they find that a school's long-term average test scores affect housing values in the immediate neighborhood, but that year-to-year fluctuations in scores do not. This suggests that homeowners care about school quality, but are aware that test scores are an imperfect indicator of neighborhood quality.

The authors also find that test scores may be related to unmeasured housing and neighborhood characteristics. This suggests that people tend to buy houses where they do because of their peers. Housing values tend to be higher closer to a neighborhood school, particularly in poor neighborhoods, and are more responsive to the test scores of white students than of black students. The study also shows that, when composite school ratings were introduced, local house prices did not decline in response to state ratings of "low-performing" for local schools. This may imply that residents already knew that these schools were low-performing.

Lessons from Chicago

After instituting high-stakes testing in 1996, the Chicago Public Schools realized a significant increase in test scores. Little is understood, however, about the channels through which high-stakes testing affects performance. Supporters of the program claim that testing makes teachers and students work harder and helps schools become more efficient. Critics claim the rules lead to "teaching to the test" and to reallocations of resources away from non-tested subjects like physical education, art, music, and social studies.

Brian Jacob examines the effects of the accountability policies instituted by the Chicago Public Schools (CPS) using school budget information for 456 elementary schools in 1995 and 2000. He distinguishes between changes in educational inputs—including student effort, parent involvement, and financial resources—and changes in school technology, such as instructional practices and school organization.

Jacob finds that most of the improvement in CPS scores comes from non-financial inputs like student effort and parental involvement rather than technological improvements. Schools made few changes to financial allocations or school organization. For example, low-achieving schools shifted only a small amount of resources away from non-tested areas, like art and music, and the changes in spending are not related to changes in student achievement. Most of the increase in spending was to hire more teachers or raise teacher salaries rather than to create new positions. Changes in educational efforts by students—including participation in after-school programs to help them with homework—had a greater effect on student achievement than changes in instructional practices or school organization. The findings will prove relevant as the federal government begins to implement the No Child Left Behind legislation that was enacted in 2001.

Other Research

In addition to the papers on education reform, the Brookings-Wharton symposium addressed two other urban economic issues:

The Geography of Inequality

Although trends in income inequality in the United States have received a substantial amount of attention over the past two decades, trends in the geographic distribution of income have been left relatively unexamined. As the affluent and poor become increasingly isolated from one another, the social and economic worlds and interests of the two groups will naturally diverge, with important implications for public finance and the provision of public services.

Using data available from 1950 to 2000, Douglas S. Massey and Mary J. Fischer of the University of Pennsylvania measure trends in class segregation and income concentration at the regional, state, and metropolitan levels, and on the neighborhood level for sixty metropolitan areas. The authors find that income and class segregation declined over the last half century as the rich and poor have become more evenly distributed throughout the country. They also show that the degree of spatial separation between affluent and poor families declined at the regional, state, and metropolitan levels.

The concentration of affluence and poverty, however, has increased in neighborhoods, leading to significant class segregation within metropolitan areas.

Income segregation measures the degree of social and class segregation between poor and affluent families. Income segregation is lowest on the regional level, having declined by more than half between 1950 and 2000. At the state level, income segregation decreased by nearly 40 percent, while in metropolitan areas, it decreased by one-third. However, census tract-level income segregation in sixty metropolitan areas increased dramatically between 1970 and 2000, indicating significant growth in class segregation within neighborhoods.

Massey and Fischer also examined income segregation by race and found that in the regions, states, and metropolitan areas, both blacks and whites experienced a comparable decrease in income segregation over the period. Neighborhood data tell a different story: income segregation within both races has increased since 1970 and moderated only slightly during the 1990s.

Poverty Concentration

Falling income inequality, declining poverty rates, and class segregation from 1950 to 2000 also produced declines in the geographic concentration of poverty at the regional, state, and metropolitan levels. Overall, the concentration of poverty fell sharply and hit a fifty-year low in 2000. Poverty isolation is greater for African Americans, since far more blacks live in the south and thus are distributed more unevenly than whites. The concentration of poverty in neighborhoods of metropolitan areas, in contrast to the decrease in overall concentration, increased by 80 percent between 1970 and 2000. Moreover, the concentration of poverty within neighborhoods for black families exceeded that for white families in each decade from 1970 through 2000.

According to Massey and Fischer, the concentration of affluence in regions, states and metropolitan areas increased between 1950 and 2000. Since class segregation and income inequality declined, the growth in the concentration of affluence is attributed to the increasing proportion of affluent families. This is also true on the neighborhood level. By 2000, the concentration of affluence in metropolitan neighborhoods was greater than the concentration of poverty. However, the authors find that the concentration of affluence does not differ by race in regions, states, or metropolitan areas within neighborhoods. On the other hand, the concentration of affluence was greater for whites than blacks within neighborhoods.

Massey and Fischer show that rich and poor families came to inhabit the same regions, states, and metropolitan areas while simultaneously moving into different neighborhoods segregated by class. Class segregation grew during the 1970s and the concentration of poverty increased through the 1980s. But the trends leveled off through the 1990s, indicating that because of that decade?s great prosperity, the situation has not deteriorated significantly. However, the trends also have not been reversed. Growing concentrations of poverty and affluence within neighborhoods indicates an increasingly divided society where rich people live in safe communities interacting with affluent peers and the poor live in high-risk, unstable neighborhoods with few prospects for economic development or social mobility.

Land-Use Regulations

The causes and effects of local land use regulation are long-standing topics of concern to researchers and policymakers, but to date little evidence has been brought to bear on this issue. Bengte Evenson of Illinois State University and William C. Wheaton of MIT use a unique dataset created for the state of Massachusetts to study local land-use regulations. They analyzed patterns of residential, commercial, industrial, open, and other land-use allocations.

The authors found that current zoning regulations of a town are a strong indicator of future zoning and development. Wealthy towns tend to protect more land and allow for less housing and commercial/industrial development while poorer towns tend to permit higher density commercial/industrial development. However, a town?s current residential or commercial density is a much better indicator of expected future density than income. In addition, Evenson and Wheaton find that towns further from Boston zone less open land for commercial/industrial uses, protect more open land, and put tighter constraints on density.

The authors' findings support the current theoretical land-use literature and conventional wisdom. In the future, the Massachusetts data can be used to further test land-use theory and examine patterns of development.

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Brookings-Wharton Papers on Urban Affairs: 2002

Janet Rothenberg Pack and William G. Gale, eds. — Tue, 30 Jul 2002 00:00:00 -0400

Brookings Institution Press 2002 250pp.

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Designed to reach a wide audience of scholars and policymakers, this new series contains studies on urban sprawl, crime, taxes, education, poverty, and related subjects.

"This journal will set the tone for urban economics for the coming decades. It will play a major role not only in academia, but also in ensuring that we have better urban economic policy." —George Akerlof, University of California, Berkeley

Contents of the third issue include:

"Local Government Fiscal Structure and Metropolitan Consolidation"
Dennis Epple (Carnegie-Mellon University), Stephen Calabrese (University of South Florida), and Glenn Cassidy
Should the Suburbs Help Finance Central City Public Services?
Andrew Haughwout (Federal Reserve Bank of NY) and Robert Inman (University of Pennsylvania)
"Tax Incentives and the City"
Therese McGuire (UCLA) and Teresa Garcia-Mila (Universitat Pompeu Fabra)
"Does Gentrification Harm the Poor?"
Jacob Vigdor (Duke University)
"Corruption in Cities: Graft and Politics in American Cities at the Turn of the Twentieth Century"
Rebecca Menes (George Mason University)
"Immigrant Children and Urban Schools: Lessons from New York on Segregation, Resources and School Attendance Patterns"
Ingrid Gould Ellen, Katherine O'Regan, Amy Ellen Schwartz, and Leanna Stiefel (New York University)

ABOUT THE EDITORS

Janet Rothenberg Pack

William G. Gale

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Problems and Prospects for Urban Areas

Janet Rothenberg Pack, Samara R. Potter and William G. Gale — Mon, 01 Jul 2002 00:00:00 -0400

Urban areas face daunting economic challenges that have increased in scope in recent years. At the same time, cities provide exciting opportunities for growth and revitalization. The interplay of these challenges and opportunities create important tasks for policymakers and researchers.

Each year, the Brookings Institution and the Wharton School of Business cosponsor a conference to address these issues and provide cutting-edge, accessible research on issues unique to urban areas, as well as on broad economic and policy topics that have special applications in an urban setting.

The most recent conference, held at the Brookings Institution on October 25-26, 2001, sponsored two groups of papers being published this month in the Brookings-Wharton Papers on Urban Affairs (Brookings Institution Press, 2002). A symposium of three papers focuses on metropolitan tax and fiscal policy, examining the effects of political mergers between cities and suburbs, the links between the economic vitality of cities and suburbs, and firm-specific tax incentives for industry relocation. The remaining conference papers focus on changing demographics in urban areas, including the impact of alternative measures of gentrification on lower income city residents and the varying experiences of immigrant students in the New York City public school system.

Symposium on Metropolitan Tax and Fiscal Policy

Cities attract businesses and residents by providing high-quality amenities. But providing those amenities requires funding, and higher tax burdens increase incentives for city residents and firms to depart for lower tax locations. Balancing these considerations is an essential problem in urban public finance. The income disparity between most large central cities and their relatively wealthier suburbs makes these issues even more difficult and politically sensitive. In addition, the potential effectiveness of many fiscal options is unknown, and the connection between economic effectiveness and political feasibility is sometimes overlooked.

Metropolitan Consolidation

Large metropolitan areas in the United States are characterized by a very large number of local governments, with many urban areas containing more than one hundred separate municipalities. The fragmentation of local government has led to concerns regarding the distribution of government services and the efficiency with which these services are provided. Central city mayors and some analysts have advocated political and fiscal consolidation, but annexation of developed suburbs has rarely occurred.

Stephen Calabrese of the University of South Florida, Glenn Cassidy of Cassidy Policy Research, and Dennis Epple of Carnegie-Mellon University model voting behavior in multiple municipalities to evaluate the effects of mergers. Voters, who vary only in income, choose their preferred level of public services and redistribution, and the level and type of tax levied. They also choose their residential location based on these policies. In equilibrium, majority rule determines tax, public service, and redistribution policy; each municipality has a balanced budget; no one wants to move; and the housing market clears. The policy favored by the median-income voter will always be adopted. The model produces results consistent with observed patterns in cities: although both large and small municipalities provide public goods, redistribution occurs almost exclusively in large central cities. Small suburban municipalities depend primarily on property tax revenues to finance public services, but central cities use both income and property taxes. The policy choices result in income stratification across the metropolitan region. Low-income households with a preference for redistribution are more likely to locate in the central city, whereas wealthy households will choose suburbs with high levels of public service provision and less redistribution.

The stratification of municipalities by income implies that mergers are generally not politically viable. Residents of a poorer municipality, such as a central city, will support a merger with a wealthier suburb to obtain higher public good provision and redistribution, with lower overall tax rates. But residents of the wealthier suburb will oppose consolidation to avoid falling property values, reduced public good provision, and increased redistribution.

The aggregate welfare effects of mergers are more complicated. A merger between two jurisdictions will prompt the wealthiest individuals in the higher income jurisdiction to move from the consolidated city to a wealthier suburb in order to escape redistribution policies. These movers from the consolidated area will become the poorest residents in their new location and will purchase housing of less than the average value in that suburb. Housing prices in the new suburb will rise and public good provision will fall. This pattern will continue across suburbs in a domino effect. As a result, consolidation results in a negative impact on surrounding suburbs as well as for the wealthier residents of the merged municipalities.

Consolidation might still raise aggregate welfare, if mergers benefit poor voters more than they harm wealthier ones. Where this is the case, governments wishing to encourage annexations could compensate suburban residents for their losses and still improve social welfare.

Besides providing new insights into the dearth of consolidations, this paper advances researchers? ability to model simultaneous decisionmaking across multiple policy choices and offers a systematic explanation for income segregation that arises even when households have no explicit preference for the characteristics of their neighbors.

Suburban Fiscal Transfers to Central Cities

In the absence of political consolidation, financial transfers from suburbs to central cities are another, possibly more feasible, way to address metropolitan area public finance issues. But should the suburbs be interested in such an arrangement? Traditionally, proponents of such transfers have suggested that transfers are justified either because central cities fund public goods that benefit suburban residents, such as infrastructure, public education, and policing, or because central city poverty is a regional problem that should be addressed via transfers from the entire urban region.

In their paper, Andrew Haughwout of the Federal Reserve Bank of New York and Robert Inman of the University of Pennsylvania argue that neither of these arguments is compelling. They examine a new rationale for suburban transfers to central cities, based on two premises. The first is that cities create agglomeration economies. These economies occur because of the geographic concentration of firms within an industry and the resultant decline in transportation and labor costs, encouragement of innovation, and ease of spreading new ideas. These agglomeration economies reduce the cost of city-produced goods to both city and suburban residents. The second premise is that weak central city government—marked by a variety of financial practices and fiscal institutions—imposes costs on city residents and firms and induces them to relocate. The relocation, though, reduces the agglomeration economies available in the city and causes the price of city-produced goods to rise. If both premises hold, weak city governments hurt suburban residents, weak city finances cause poor suburban economic health, and suburban residents should be willing to pay to improve center cities' weak financial situation in order to preserve the benefits of agglomeration economies.

Haughwout and Inman demonstrate empirically that weak city finances are associated with negative city and suburban economic outcomes. In particular, they show that weak budgetary institutions, strong city unions, rising poverty rates and declining tax bases are associated with lower income, population growth, and rates of home value appreciation in both cities and their surrounding suburbs. They also develop a structural simulation model based on Philadelphia's economy that builds in a link between city finances and suburban economic outcomes. The effects of city finances on suburban health in Philadelphia are found to be similar to those found in the aggregate data. In this simulation a causal relation is assumed by construction, and thus the model implies that a suburban family should be willing to pay between $100 and $250 annually to improve city fiscal institutions in order to realize the benefits of agglomeration economies in the city.

The conclusion that weak city finances reduce agglomeration economies implies that transfers from suburbs to cities would only protect agglomeration economies if the funds were used to strengthen weak city finances. Such transfers would be counterproductive if the funds were used to raise pay for city workers or increase constituent services. To avoid these problems and ensure that the funds are used appropriately, Haughwout and Inman advocate the use of a number of specific mechanisms for transfers, including using suburban aid to fully fund state poverty mandates, reforming local property tax rules, and making aid dependent on the adoption of competitive bidding practices for city service contracts.

Tax Incentives and Business Location

If city-suburb consolidations are rare and suburban areas are reluctant to transfer resources to central cities, as the first two papers suggest, a third fiscal option for urban economic development is large, firm-specific tax breaks aimed at attracting or retaining particular businesses. Such actions have been highly publicized in the past, ranging from cities recruiting professional sports teams, to Alabama wooing Mercedes Benz in the early 1990s.

Despite the frequency of such actions, the research literature casts considerable doubt on the effectiveness of such incentives, on both theoretical and empirical grounds. One strand of the theoretical literature argues that under tax competition, all jurisdictions will select inefficiently low tax rates to prevent firms from exiting. This will result in a reduction of public service provision below efficient levels. Another strand of the literature argues that tax competition across communities results in an efficient allocation of resources, because people can choose where to live, and thus specific tax incentives introduce distortions. This approach assumes that if no tax incentives are offered, cities tax corporations' capital at rates equal to the marginal benefit of the public goods provided to the firms. Neither approach justifies large tax incentives for particular companies.

In their contribution to the conference, Teresa Garcia-Mila of the Universitat Pompeu Fabra in Spain and Therese McGuire of the Institute of Government and Public Affairs at the University of Illinois challenge the conventional wisdom. They develop a model in which cities compete for a mobile capital stock and benefit from productivity-enhancing agglomeration economies. Under these circumstances, the efficient tax rates on new firms equals the difference between the marginal benefit to firms of the public services they consume and the marginal agglomeration benefits to the city of the additional capital brought by the firm.

The authors then examine Chicago's decision in 2001 to offer Boeing $50 million in tax incentives to relocate its corporate headquarters from Seattle. Chicago's pursuit of Boeing is puzzling, given that it involved only the relocation of Boeing's headquarters rather than its manufacturing plants. Moreover, since most of the headquarters employees transferred from Seattle, few new jobs were created. In stark contrast, Chicago allowed a large local candy manufacturer employing nearly 1,000 people to leave the city without offering it tax incentives to stay. Garcia-Mila and McGuire suggest that Chicago planners believed that a management-oriented firm like Boeing would create greater potential for knowledge spillovers than would the retention of the manufacturing facility. The authors conclude that agglomeration of capital may have sufficient economic as well as political payoffs to justify firm-specific tax incentives.

Gentrification and Immigration

Two other papers presented at the conference provide new evidence on current issues in urban economics and urban policy. They demonstrate the breadth of topics that fall comfortably within the area of urban economics and the important insights that can be gained on urban issues from related fields of research, such as poverty and welfare or labor economics.

Does Gentrification Harm the Poor?

Although white flight to the suburbs during the second half of the twentieth century is often viewed as a causal factor in the demise of central cities, the return of affluent households to city neighborhoods sometimes elicits similarly intense criticism. Gentrification, or the influx of upper-middle class or wealthy households into previously poor neighborhoods, is popularly seen as harmful to poor and minority residents. The closing of the Cabrini-Green Housing Project in Chicago and its partial replacement with townhomes, for example, produced an uproar among long-time public housing residents, who felt they were being driven from their homes despite city officials' reassurances that mixed-income housing developments would be beneficial to low-income as well as new middle-class neighborhood residents.

A paper by Jacob Vigdor of Duke University suggests that much less is known about the impact of gentrification on poor families than is commonly supposed. Rather than assuming there is a consensus definition, Vigdor begins by defining gentrification and makes the distinction between preference-driven and income-driven gentrification. In preference-driven gentrification, high-income households raise their valuation of the amenities available in poor neighborhoods. A common example is the two-earner family that decides it prefers a shorter commute and increases its willingness to pay to live in the more central neighborhood. Income-driven gentrification occurs when a change in the productivity of high-income households raises the demand for, and hence the price of, housing in upper-income neighborhoods. This forces some of the people in these neighborhoods to move to lower priced areas.

Under both types of gentrification, housing prices rise in the formerly poor neighborhoods, so that renters there either have to move or absorb the higher rental costs (and possibly higher amenities). One difference between the two lies in housing prices in the upper-income neighborhood, which fall under preference-driven gentrification but rise under income-driven gentrification. Vigdor proposes policy options that both directly and indirectly reduce potential harm caused by gentrification. Rent subsidies or relocation assistance directly address rising costs of housing for low-income households. Job training or education subsidies could make poor residents more able to compete in the housing market.

Gentrification may also have effects on the poor apart from through the housing market. Many of these effects are likely to be positive. Rising housing prices can raise property tax revenues, increase redistribution, and improve public services. An influx of higher income households might create job opportunities for low-income residents or relocate jobs closer to the neighborhood. Poor residents might benefit from improvements in neighborhood quality, such as lower crime rates.

Vigdor argues that most work on gentrification focuses too narrowly on spatial displacement and does not in fact demonstrate that displacement is caused by gentrification or that it causes harm. Using Boston as a case study, he finds that households with low educational attainment (who are more likely to be among the long-term poor) living in gentrifying areas are no more likely to move than other households in the area or than low-education households in other areas. Gentrification has not increased the segregation of Boston neighborhoods by socioeconomic class; in fact, gentrification seems to lead to more mixed-income neighborhoods.

Immigrants and School Segregation

The proportion of the U.S. population that is foreign-born—currently about 10.4 percent—is at its highest level since 1930. Research suggests that segregation among racial groups is significant and negatively affects children's educational attainment, but it is unknown whether the same holds true for immigrants. Peer effects—proximity to low-income, less-educated classmates—appear to negatively affect racial minorities, particularly for in the areas of education and employment. Peer effects may have a different impact on the children of immigrants because although the parents generally have little education, immigrant groups often demonstrate a strong preference for educating their children. Similarly, although schools with large racial minorities have been found to receive less funding than average, no previous studies have investigated the impact of immigrant segregation on school funding. Indeed, segregation of immigrants may improve access to resources, as concentration of a group may make it more efficient for the government to provide particular services, such as classes in English as a second language.

Using evidence from the New York public schools, in which 16 percent of students were foreign-born in 1998-99, Ingrid Gould Ellen, Katherine O'Regan, Amy Ellen Schwartz, and Leanna Stiefel of New York University evaluate the degree of immigrant segregation and its relationship to resource allocation and student performance. Having assembled a data set that contains information on the academic and socioeconomic characteristics of all children in New York City public schools in 1998-99, aggregated to school level, the authors find a relatively low level of segregation for immigrants overall.

Some groups of immigrant students, particularly students from the former Soviet Union and the Caribbean, are considerably more segregated than foreign-born students overall, but still less segregated than nonwhite students. The authors show that different immigrant groups, particularly Soviet and Caribbean immigrants, have substantially different peer influences and access to educational resources. Like native students, immigrant students are highly segregated by race. Racial segregation is accompanied by peer characteristics, teacher quality, and classroom and aggregate school spending patterns that have negative effects that overwhelm differences in educational attainment due to nativity. Soviet students who attend schools with high percentages of white students have higher quality teachers and higher achieving peers, while Dominican students in predominantly black schools are educated with students characterized by extremely high poverty rates and low test scores.

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Growth and Convergence in Metropolitan America

Janet Rothenberg Pack — Thu, 17 Jan 2002 00:00:00 -0500

Brookings Institution Press 2002 214pp.

While the suburbs of most metropolitan areas are wealthier than their urban counterparts, rapid regional growth can improve the welfare of both city and suburb, according to a new book from Janet Rothenberg Pack. In Growth and Convergence in Metropolitan America, Pack identifies growth trends that have contributed to the convergence of welfare among regions.

Pack analyzes demographic, social, and economic data from 277 metropolitan areas in the northeastern, midwestern, southern, and western United States between 1960 and 1990. Her analysis reveals a strong connection between regional growth and improved socioeconomic vitality. She finds little connection between population growth-the focus of many previous studies-and well-being, but a strong connection between per capita income growth and well-being. Moreover, there has been a major change in the factors associated with economic growth between the 1970s and 1980s. In the latter decade, the importance of an educated labor force and major universities have assumed major importance. This appears likely to have continued to be true in the 1990s.

While current urban policy has focused on intra-metropolitan cooperation as the key to improving conditions in declining or slow-growing urban areas, Pack's analysis emphasizes the major differences among the larger regions of the country-both their cities and suburbs. From this perspective, national policies, both macro-economic policy and the progressive income tax, appear to be the most effective influences promoting regional convergence and improving the socio-economic well-being of both city and suburban residents.

ABOUT THE AUTHOR

Janet Rothenberg Pack

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Brookings-Wharton Papers on Urban Affairs: 2001

Janet Rothenberg Pack and William G. Gale, eds. — Mon, 16 Jul 2001 00:00:00 -0400

Brookings Institution Press 2001 300pp.

Subscribe to Brookings-Wharton Papers on Urban Affairs

Designed to reach a wide audience of scholars and policymakers, this new series contains studies on urban sprawl, crime, taxes, education, poverty, and related subjects.

Contents of the second issue include:

"Decentralized Employment and the Transformation of the American City"
Edward Glaeser (Brookings Institution) and Matthew Kahn (Columbia University)

"Urban Sprawl: Lessons from Urban Economics"
Jan K. Brueckner (University of Illinois)

"Can Boosting Minority Car-Ownership Rates Narrow Inter-Racial Employment Gaps?
Steven Raphael (University of California, Berkeley) and Michael Stoll (UCLA)

"The Effects of Urban Poverty on Educational Outcomes: Evidence from a Randomized Experiment"
Jens Ludwig (Georgetown University), Helen F. Ladd (Duke University), and Greg J. Duncan (Northwestern University)

"Explaining Recent Declines in Food Stamp Program Participation"
Janet Currie and Jeffrey Grogger (UCLA and NBER)

"Racial Minorities and the Geography of Self-Employment"
Dan Black, Douglas Holtz-Eakin, and Stuart Rosenthal (Syracuse University)

William G. Gale is the Joseph A. Pechman fellow in the Economic Studies program at the Brookings Institution. Janet Rothenberg Pack is professor of public policy and management and real estate at the Wharton School, University of Pennsylvania.

ABOUT THE EDITORS

Janet Rothenberg Pack

William G. Gale

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The New Urban Economy: Opportunities and Challenges

Janet Rothenberg Pack, Samara Potter and William G. Gale — Fri, 01 Jun 2001 00:00:00 -0400

Symposium on Decentralization and Urban Sprawl

The enormous decentralization of economic activity over the past several decades has been the central feature of metropolitan development during the last half-century. Some observers view this trend with alarm and argue that decentralization has led to a series of maladies in central cities, as well as to urban sprawl and related problems in the suburbs. Others view decentralization as a positive development, reflecting the preferences of Americans regarding residence, employment, and other factors. A full assessment of decentralization, however, requires facts documenting the extent and nature of the trend, analyses of the causes and consequences of decentralization, and a conceptual framework that integrates these factors. Accordingly, the volume begins with a symposium of three papers to explore these issues.

Decentralization: Basic Facts and Their Implications

In the traditional view, urban areas have a dense central business district with concentrated employment and production, in order to reduce costs of transportation and information sharing. In these so-called monocentric urban areas, land has the highest value in the city center because employment density is highest there. As distance from the city center increases, land and housing prices fall, lot sizes lengthen, workers' commute times rise, and poverty declines.

This standard view has been increasingly challenged by decentralization. In their paper, economists Edward Glaeser of Harvard University and Brookings and Matthew Kahn of Tufts University document in new ways the basic facts of decentralization and analyze the implications for the economic structure of urban areas. They show that in 1940, only one of the ten largest cities had population density below 10,000 people per square mile. By 1990, seven of the ten largest cities had densities below 7,500. Although there is no formal definition of decentralization, urban areas today are highly decentralized: by 1996, only 24 percent of jobs in U. S. metropolitan areas were within three miles of a city center.

Despite the ubiquity of decentralization, there are substantial differences across urban areas. In New York, one of the few cities with concentrated employment patterns, over 45 percent of jobs are within three miles of the city center. In Los Angeles, which is known for its sprawling nature, 45 percent of employment is located within an 11-mile ring of the city center. Glaeser and Kahn also find that the dispersion of employment and population in Chicago, and in most other American metropolitan areas, bears a much stronger resemblance to the spatial patterns in Los Angeles than in New York.

After documenting these trends, the authors examine the causes. The residential preferences of workers appear to be the driving forces behind this move toward decentralization, according to Glaeser and Kahn. That is, firms have located in the suburbs in large part because that is where the workers choose to live. In addition, better access to trucking routes from suburban locations encourages manufacturing firms to locate in the suburbs. The trend toward decentralization appears to be somewhat less pronounced among cities that are more than 200 years old and somewhat more pronounced among those less than 60 years old. In addition, cities with younger suburbs are associated with more decentralization of employment. Forces offsetting decentralization include the advantage of urban areas in accelerating the communication of ideas. Idea-intensive or service-based industries (such as commercial banking) are more likely to locate in the central city, while manufacturing firms and firms that require more physical infrastructure are more likely to locate in the suburbs.

These results have striking implications. The decentralization of employment suggests that the classic stylized facts of urban economics may no longer be empirically valid. Indeed, in contrast to the standard model, Glaeser and Kahn find that cities with more decentralized employment are less likely to have housing prices fall and commute times rise as distance from the city center increases. Interestingly, the spatial patterns for these factors are still correlated with employment densities, but since employment is no longer concentrated at the city center, the spatial patterns do not follow those suggested by the traditional approach. Thus, Glaeser and Kahn present an important set of facts that disputes much traditional thinking on cities, and will challenge urban experts to develop innovative approaches for thinking about urban dynamics.

Systematic Thinking About Urban Sprawl

Extensive decentralization of cities and the resulting development of the urban fringe bring new users to roadways, reduce open space, and require cities or suburbs to extend their utility services farther. All of these factors raise concerns about urban sprawl, which has become an increasingly contentious political issue in recent years. Twelve states have enacted growth management programs, and 240 anti-sprawl initiatives appeared on November 1998 local and state ballots, with many additional proposals in November 2000.

In light of this heated public debate, University of Illinois economist Jan Brueckner provides a framework in which to analyze sprawl issues and the relative merits of alternative remedies. He defines urban sprawl as the excessive spatial growth of urban areas. The emphasis on whether growth is excessive is crucial, because the natural growth of urban areas due to increases in income or population or improvements in transportation efficiency should not be a cause for concern.

Brueckner's paper suggests that under current policies, there are reasons to believe that too much new suburban development occurs because developers and new residents are not forced to pay the full costs they impose on others. He recommends that forcing developers and new residents to face these costs with taxes and fees is the best strategy for controlling growth. He highlights three such problems and discusses the prospects and pitfalls of the implied policy solutions.

First, each new commuter that moves to the suburbs adds to roadway congestion there and consequently imposes costs on others, including increasing the time and fuel costs needed to drive a given distance. Economists have often suggested forcing drivers to shoulder these costs by assessing congestion tolls. Brueckner points out that technological developments could make assessing such tolls simpler now than they have been previously, but notes a history of strong political resistance to such taxes.

Second, suburban development reduces the amount of open space around the perimeter of a city, which reduces the benefits that all area residents can obtain from such spaces. Brueckner discusses the possibility of using development taxes to correct this market failure, but warns that identifying the optimal level for such a tax would be extremely difficult in practice because it is nearly impossible to measure precisely the value people place on the amenity of undeveloped land outside the city.

Third, cities do not charge developers or new residents the full cost of extending infrastructure—such as water and sewer lines—to new developments. This encourages development beyond optimal levels. Impact fees for service extension could correct this pricing error.

Some metropolitan areas concerned about urban sprawl, such as Portland, Oregon, have tried another policy alternative: urban growth boundaries. These boundaries are set by governments and designate a ring beyond which urban development is prohibited or very strictly controlled. Brueckner argues that such policies are likely to be difficult to implement effectively and thus are likely to hurt urban residents, especially low-income residents. Moreover, the policies do not specifically target the market failures of road congestion, utility use, and open space. He warns that in some cases, a draconian urban growth boundary policy could be worse for society than no government intervention and its resulting sprawl.

Brueckner's findings will not provide solace to staunch advocates on either side in the debate on urban sprawl. Rather, the paper highlights the importance of systematic thinking on the causes and consequences of sprawl and the necessity of matching both the character and level of the policy intervention to the particular problems that sprawl presents.

Employment Opportunities in Decentralized Metropolitan Areas

The exodus of jobs to the suburbs raises the possibility that people who continue to live in cities may find it more difficult to find jobs close to home. If that is the case, the ability to commute via public transportation or private automobile would become an increasingly important determinant of people's ability to obtain and retain employment. The issue becomes especially interesting from a policy viewpoint, considering that urban residents are disproportionately minority and lower-income households, and that public transportation often provides poor service for those who live in the city and work in the suburbs.

University of California economists Steven Raphael and Michael Stoll examine the importance of car ownership for employment. They document anew the spatial mismatch between certain employment opportunities and available workers. The main focus of their paper is an empirical examination of how car ownership affects employment probabilities for the black and Latino population relative to the white population. White families are more likely to have cars; only 5 percent of white households do not own an automobile, compared to 24 percent of black households and 12 percent of Latino households. Among those who own cars, however, the probability of being employed is nearly constant across these groups. The authors find a positive relationship between owning a car and being employed, controlling for other factors. They also find that this relationship is stronger for more segregated minority groups. It is much stronger for blacks than for whites, and slightly stronger for Latinos than for whites. This effect is also stronger in cities in which black households are more geographically isolated from employment opportunities.

Raphael and Stoll then consider subsidies for minority car ownership. The authors show that raising car ownership rates for minorities to those for white households would be expected to significantly reduce the employment rate gap between these groups. They note that increased car use would worsen traffic-related externalities such as congestion and air quality, but they also suggest that many minorities with cars would be reverse commuters, traveling from homes in the central city to employment in the suburbs. Furthermore, they expect many minority workers to be employed in night shifts or at other times that would not conflict with rush hour traffic.

Research Papers

The other three papers presented at the conference provide new evidence on several current issues in urban economics and urban policy: the effects of housing relocation programs, the causes of the decline in food stamp participation, and the determinants of minority business ownership.

Do Housing Relocation Programs Help Children's School Performance?

The combination of residential segregation by income and race and the suburbanization of high-income households raises many questions about the effects of neighborhood on residents and children. To what extent do peer groups influence individuals' outcomes? Do children who grow up in high-poverty environments develop differently from other children? At what point do neighborhood effects become irreversible?

The experimental design of the Department of Housing and Urban Development's Moving to Opportunity program, currently operating in five cities, allows researchers to study overall effects of neighborhood on children's outcomes. The program randomly assigns public housing families that volunteer for the program to one of three groups: a group that is given Section 8 housing vouchers valid only in census tracts with a very low poverty rate; a group that is given Section 8 vouchers valid anywhere; and a group that is given no assistance in finding alternative housing.

The effect of this program on children's educational achievements is the focus of the conference paper by economists Jens Ludwig of Georgetown University, Helen Ladd of Duke University, and Greg Duncan of Northwestern University. (Earlier research on the issue by Duncan and Ludwig was published as a Brookings Institution Children's Roundtable Policy Brief in July 2000.) In the conference paper, the authors find that children aged five through twelve who moved to low-poverty neighborhoods demonstrated substantial improvement on standardized tests in both reading and math. For teenagers who moved to low-poverty neighborhoods, only the reading tests were available, and those scores did not differ from non-movers. However, teens who transferred to lower poverty areas were more often retained in grade and more often subject to disciplinary action than their peers who did not move. The authors suggest that differences in school standards, rather than actual declines in teens' behavior or abilities, may account for these apparently negative implications.

The authors believe their findings are encouraging, but are only one component of a larger debate about whether expansion of relocation policies would be desirable. Which aspects of the new neighborhoods or schools are leading to the positive effects remains unclear. In some cases, reform of schools in the low-income neighborhoods might be as effective as relocation. Also, introducing students from low-income neighborhoods into low-poverty areas might have negative impacts on outcomes of host children. The best policy options for taking advantage of neighborhood effects are uncertain. Nevertheless, the findings provide important new evidence that should be part of any discussion of the costs and benefits of relocation programs.

Why Did Food Stamp Program Participation Decline?

The Food Stamp Program provides a monthly allotment of coupons or credit for low-income households to purchase food at participating stores, and is currently one of the government's largest transfer programs. However, program participation rates have fallen dramatically in the last several years, from 27 million persons in 1994 to 20 million in 1998, with much of the decline occurring after 1996 and most of it occurring in urban areas. The conference paper by UCLA economists Janet Currie and Jeffrey Grogger examines the causes of the decline in Food Stamp Program enrollment and the implications for public policy and urban areas.

Three alternative (and not mutually exclusive) hypotheses have been put forth to explain falling enrollment: welfare reform, the strength of the economy, and changes in stigma and transaction costs attached to participation in the Food Stamp Program.

The 1996 welfare reform law allowed states to penalize food stamp participants for failure to meet work requirements, which may have substantially reduced the size of the eligible population. Currie and Grogger found that, overall, welfare reform was responsible for almost a third of the decrease. This effect was especially strong among single-head households.

The strong economy and corresponding lower unemployment rates explained about one-fifth of the overall decline in food stamp participation between 1993 and 1998.

Both of these factors, along with changes in program rules, may have increased the transaction costs and stigma associated with food stamp participation. More frequent recertification requirements under the new rules impose higher costs on households wishing to sign up for the program. Stigma may be more of a factor in states that still provide food stamp coupons, as compared with the roughly two dozen states using credit card-style electronic balance transfer methods. (All states are required to shift to electronic transfer methods by October 2002. Currie and Grogger's results indicate that transaction costs are especially problematic for single parents and rural households, while stigma has more of an effect for married households without children.

The decline in food stamp use is particularly important for urban areas, given the concentration of the poor in cities. Much of the fall in participation rates, in fact, occurred in cities. This is especially true of the decline due to welfare reform. Currie and Grogger found that implementation of the Temporary Assistance for Needy Families (TANF) program had almost no impact on program rolls in rural areas, but was responsible for about 40 percent of the decline in food stamp enrollment in central cities. In comparison, decreases in unemployment were responsible for only 18 percent of the decline in central city locations. TANF implementation seems to play a greater role in the reduction of Food Stamp Program participation in cities while falling unemployment has less impact, suggesting needy families in central cities are experiencing more difficulty in obtaining food stamps, rather than experiencing reduced need. Under these circumstances, policy reforms intended to restore benefits to households in need should target families in central cities, especially single-head households.

Why Do Minority Self-Employment Rates Vary Across Metropolitan Areas?

The promotion of minority business ownership has been a major thrust of federal and local government policies for some time. The much lower rate of self-employment among minorities contributes to differences in employment rates between minority and white populations, and may well restrict the abilities of minority groups to accumulate wealth. About 11 percent of the overall population, but only 4 percent of the black population, is self-employed. Whites are self-employed at above-average rates of 13 percent, with Asians at 11 percent and Latinos in the middle at about 7 percent. Average earnings from self-employment are 93 percent higher for whites than for blacks. The variation in self-employment rates across metropolitan areas is also higher for all three minority groups than for whites.

In their conference paper, Syracuse University economists Dan Black, Douglas Holtz-Eakin, and Stuart Rosenthal show that characteristics, including age, immigrant status, and education, are important determinants of whether a particular person is self-employed, but they do not vary across metropolitan areas in ways that can explain variation in self-employment rates and earnings in different cities.

The authors also examine city-level variables and show that the degree of segregation of the minority population within a given metropolitan area does not have a significant impact on minority self-employment rates. What does make a difference is the purchasing power of minority groups in a city. In cities with wealthier minority populations, higher rates of minority self-employment are observed, suggesting that the economic power of the minority community is important to sustaining minority entrepreneurs. There are several possible channels through which a minority group's economic clout could influence the self-employment rate, including various consumer discrimination theories and improved access of minorities to lenders. Distinguishing among these alternatives will play an important role in determining the policy implications of the authors' findings.

Conclusion

Taken together, the papers presented at the Brookings-Wharton conference show that significant progress can be made in disentangling economic issues that affect and are affected by urban areas. Each of the papers provides new facts or models that will be useful to policymakers, academics, students, and other interested groups and individuals.

As the problems and opportunities created by urban areas continue to evolve, the findings in these papers should aid in providing new policy solutions, developing ways to exploit opportunities for enhancing urban development and economic well-being, and setting a foundation for future analysis.

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Brookings-Wharton Papers on Urban Affairs: 2000

Janet Rothenberg Pack and William G. Gale, eds. — Wed, 12 Jul 2000 00:00:00 -0400

Brookings Institution Press 2000 288pp.

Subscribe to Brookings-Wharton Papers on Urban Affairs

Designed to reach a wide audience of scholars and policymakers, the Brookings-Wharton Papers on Urban Affairs is an annual series that serves as a forum for cutting-edge, accessible research on urban policy. The editors seek to integrate broader research into the urban policy discussion by bringing urban studies scholars together with economists and researchers studying subjects with important urban implications. The six papers in this inaugural volume are divided into two sections. The first three assess the state of urban research and policy. The others address important aspects of the urban economy: education, racial segregation, and federal housing policies.

ABOUT THE EDITORS

Janet Rothenberg Pack

William G. Gale

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Metropolitan Areas: Regional Differences

Janet Rothenberg Pack — Tue, 01 Sep 1998 00:00:00 -0400

The New argument in the urban research literature of the 1990s is that the economic health of cities and suburbs is closely linked, with the prosperity of suburban communities, in particular, depending on that of the central city. Suburbs that ignore the decline of their central cities cannot, despite their strong belief to the contrary, go it alone. The well-being of entire metropolitan areas hinges on intra-metropolitan cooperation—and on public policies that encourage city-suburb cooperation in infrastructure planning and financing, tax-base sharing, school finance reform, school district consolidation, and land use planning.

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Janet Rothenberg Pack