The Persistence of Urban Decline: Evidence from France’s Largest Coal Basin
Abstract:
Urban decline and urban growth are not two sides of the same coin. When local positive shocks occur it typically leads to an expansion of the building stock, but when negative shocks hit, the existing building stock persists. We use the history of coal production in France’s largest mining basin as a source of exogenous variation in negative economic shocks. The geological delimitation of the basin and the placement of large-scale housing developments in close proximity to mines provide us with the opportunity to exploit very local spatial variation to identify the causal determinants of urban decline. We show that housing prices today drop by 11% when entering the mining basin. About 40% of this gap can be attributed to lower housing quality, with the remaining portion being ascribed to spillover effects. We proceed by setting up a dynamic spatial equilibrium model to disentangle the impact of spillovers and housing quality in determining the persistence of urban decline. Our model matches key moments in the data and predicts a protracted period of decline persisting for several decades before reaching a long-term equilibrium.
About Hans Koster:
Hans Koster is Full Professor of Urban Economics and Real Estate at the Department of Spatial Economics, Vrije Universiteit Amsterdam. Hans obtained his bachelor’s degree in Economics at the Erasmus University Rotterdam and his master’s degree (cum laude) in Spatial Economics at the Vrije Universiteit Amsterdam. He defended his Ph.D. thesis in 2013 on the economics of the spatial structure of cities. Hans is also a Research Fellow with the Tinbergen Institute, and a Research Associate with the Centre for Economic Policy Research (CEPR). Hans’s research concerns the economic analysis of cities, regions and the environment. His interests lie in understanding the functioning of housing and land markets, the agglomeration of firms and people within cities, the consequences of place-based policies, income inequality and segregation within cities, as well as the functioning of retail and commercial property markets within cities. Hans’s research relies on big data and the use of advanced econometric techniques. Hans was ranked 10th in the ESB Dutch Economist Rankings in 2023, 14th in 2022, 21st in 2021 and 24th in 2020. See www.urbaneconomics.nl for more information.
Language: English
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