Central cities and suburbs: Economic rivals or allies

This dissertation examines an issue important to urban development policy: the economic interdependence between central cities and their suburbs. Whether or not the suburbs continue to "need" their central city is a question that arose from the simultaneous occurrences of urban decline and suburban prosperity in the 1970's and 1980's. To many, the movement of jobs and residents to suburban jurisdictions implied that the suburbs were no longer dependent on the central city from which they grew, indicating that central cities and suburbs competed for jobs and growth in the same local labor market. Hence, central cities and suburbs were viewed as economic rivals. Alternatively, urban growth models stressed a complementarity between growth of the urban core and its periphery due to the existence of urbanization economies, scale economies external to the firm and its industry. However, due to the endogeneity of factors affecting both central city and suburban growth, the empirical literature that developed suffered from an inability to identify exogenous shocks unique to the central city and suburban economies, thereby limiting its effectiveness in providing a conclusive answer regarding the interdependence between central cities and their suburbs.; This dissertation provides an important contribution to this literature by constructing an index, called the Export Price Index (EPI), able to measure price shocks to the export industries that comprise center cities and suburbs. The analysis begins with an investigation of the relationship between central city and suburban employment growth between the two areas. Using the EPI for a panel of 77 MSAs from 1982 through 2000, reduced form models of central city and suburban employment growth are estimated, illustrating the response of suburban employment to an exogenous price shock in the central city, and vice versa. The results indicate a stronger interdependence than previously reported. Negative demand shocks to the central city decrease suburban employment more than they decrease central city employment. Negative demand shocks to the suburban economy decrease central city employment, although the magnitude depends on city size. (Abstract shortened by UMI.)...