BEE 2321: Urban Economics
Course Purpose: This course introduces learners to the scope and nature of urbanization and the effects
of urbanization to the process of Economic Development
Course Objectives: At the end of the course learners should be able to:-
1. Describe the social, political and economic factors that led to the establishment of urban
centers in Kenya.
2. Explain the main functions of the urban centers in Kenya
3. Discuss the contribution of urban centers towards economic development.
Course Description:
Economic, political and social origins of urban centers in Kenya; Economic rationale for the
establishment of urban centers; the urban economy: commerce and industry, housing, transportation,
education and health; Functioning urban land and housing markets; Urban centers and economic
development; Theories of urban growth; Urban planning.
Teaching Methodology
1. Lectures,
2. Case Analyses,
3. Group discussions,
4. Guest speakers
Instructional Materials:
Tablet, Smart board, LCD projector & Computers, Flipcharts, televisions, videos.
Course Evaluation
CATs/Assignment/Presentation 30 %
Final Examination 70%
Total 100%
Core Reading Materials
1
, 1. O’ Sullivan, (2001), Urban Economics. Fourth Edition. McGraw-Hill International Edition.
Recommended Reference Journals
1. Journal of Demography.
2. Journal of environment and Resource Economics.
3. Journal of Applied Economics.
2
,Why do cities exist?
What determines the location, size, shape and growth of cities?
We’ll explain it by studying utility-maximizing households and profit-maximizing
firms
- Cities are important because they facilitate growth.
- Cities exist because benefits (innovation, production and trade) exceed
costs (cities are noisy, dirty and crowded).
• Urban economics is broadly the economic study of urban areas; as such, it involves
using the tools of economics to analyze urban issues such as crime, education, public
transit, housing, and local government finance. More specifically, it is a branch of
microeconomics that studies urban spatial structure and the location of households and
firms (Quigley 2008).
• Much urban economic analysis relies on a particular model of urban spatial structure,
the monocentric city model pioneered in the 1960s by William Alonso, Richard Muth,
and Edwin Mills. While most other forms of neoclassical economics do not account for
spatial relationships between individuals and organizations, urban economics focuses on
these spatial relationships to understand the economic motivations underlying the
formation, functioning, and development of cities.
• Since its formulation in 1964, Alonso's monocentric city model of a disc-shaped Central
Business District (CBD) and the surrounding residential region has served as a starting
point for urban economic analysis. Monocentricity has weakened over time because of
changes in technology, particularly, faster and cheaper transportation (which makes it
possible for commuters to live farther from their jobs in the CBD) and communications
(which allow back-office operations to move out of the CBD).
• Additionally, recent research has sought to explain the polycentricity described in Joel
Garreau's Edge City. Several explanations for polycentric expansion have been proposed
and summarized in models that account for factors such as utility gains from lower
3
, average land rents and increasing (or constant) returns due to economies of
agglomeration (Strange 2008).
Market forces in the development of cities
• Market forces in the development of cities relate to how the location decision of firms
and households causes the development of cities. The nature and behavior of markets
depend somewhat on their locations therefore market performance partly depends on
geography (McCann 2001:1). If a firm locates in a geographically isolated region, its
market performance will be different than a firm located in a concentrated region.
The location decisions of both firms and households create cities that differ in size
and economic structure. When industries cluster, like in Silicon Valley in California,
they create urban areas with dominant firms and distinct economies.
• By looking at location decisions of firms and households, the urban economist is able to
address why cities develop where they do, why some cities are large and others small,
what causes economic growth and decline, and how local governments affect urban
growth (O'Sullivan 2003:14). Because urban economics is concerned with asking
questions about the nature and workings of the economy of a city, models and techniques
developed within the field are primarily designed to analyze phenomena that are confined
within the limits of a single city (McCann 2001:2).
Land use
• Looking at land use within metropolitan areas, the urban economist seeks to analyze the
spatial organization of activities within cities. In attempts to explain observed patterns of
land use, the urban economist examines the intra-city location choices of firms and
households. Considering the spatial organization of activities within cities, urban
economics addresses questions in terms of what determines the price of land and why
those prices vary across space, the economic forces that caused the spread of employment
from the central core of cities outward, identifying land-use controls, such as zoning, and
interpreting how such controls affect the urban economy (O'Sullivan 2003:14).
Economic policy
• Economic policy is often implemented at the urban level thus economic policy is often
tied to urban policy (McCann 2001:3). Urban problems and public policy tie into
urban
4
Course Purpose: This course introduces learners to the scope and nature of urbanization and the effects
of urbanization to the process of Economic Development
Course Objectives: At the end of the course learners should be able to:-
1. Describe the social, political and economic factors that led to the establishment of urban
centers in Kenya.
2. Explain the main functions of the urban centers in Kenya
3. Discuss the contribution of urban centers towards economic development.
Course Description:
Economic, political and social origins of urban centers in Kenya; Economic rationale for the
establishment of urban centers; the urban economy: commerce and industry, housing, transportation,
education and health; Functioning urban land and housing markets; Urban centers and economic
development; Theories of urban growth; Urban planning.
Teaching Methodology
1. Lectures,
2. Case Analyses,
3. Group discussions,
4. Guest speakers
Instructional Materials:
Tablet, Smart board, LCD projector & Computers, Flipcharts, televisions, videos.
Course Evaluation
CATs/Assignment/Presentation 30 %
Final Examination 70%
Total 100%
Core Reading Materials
1
, 1. O’ Sullivan, (2001), Urban Economics. Fourth Edition. McGraw-Hill International Edition.
Recommended Reference Journals
1. Journal of Demography.
2. Journal of environment and Resource Economics.
3. Journal of Applied Economics.
2
,Why do cities exist?
What determines the location, size, shape and growth of cities?
We’ll explain it by studying utility-maximizing households and profit-maximizing
firms
- Cities are important because they facilitate growth.
- Cities exist because benefits (innovation, production and trade) exceed
costs (cities are noisy, dirty and crowded).
• Urban economics is broadly the economic study of urban areas; as such, it involves
using the tools of economics to analyze urban issues such as crime, education, public
transit, housing, and local government finance. More specifically, it is a branch of
microeconomics that studies urban spatial structure and the location of households and
firms (Quigley 2008).
• Much urban economic analysis relies on a particular model of urban spatial structure,
the monocentric city model pioneered in the 1960s by William Alonso, Richard Muth,
and Edwin Mills. While most other forms of neoclassical economics do not account for
spatial relationships between individuals and organizations, urban economics focuses on
these spatial relationships to understand the economic motivations underlying the
formation, functioning, and development of cities.
• Since its formulation in 1964, Alonso's monocentric city model of a disc-shaped Central
Business District (CBD) and the surrounding residential region has served as a starting
point for urban economic analysis. Monocentricity has weakened over time because of
changes in technology, particularly, faster and cheaper transportation (which makes it
possible for commuters to live farther from their jobs in the CBD) and communications
(which allow back-office operations to move out of the CBD).
• Additionally, recent research has sought to explain the polycentricity described in Joel
Garreau's Edge City. Several explanations for polycentric expansion have been proposed
and summarized in models that account for factors such as utility gains from lower
3
, average land rents and increasing (or constant) returns due to economies of
agglomeration (Strange 2008).
Market forces in the development of cities
• Market forces in the development of cities relate to how the location decision of firms
and households causes the development of cities. The nature and behavior of markets
depend somewhat on their locations therefore market performance partly depends on
geography (McCann 2001:1). If a firm locates in a geographically isolated region, its
market performance will be different than a firm located in a concentrated region.
The location decisions of both firms and households create cities that differ in size
and economic structure. When industries cluster, like in Silicon Valley in California,
they create urban areas with dominant firms and distinct economies.
• By looking at location decisions of firms and households, the urban economist is able to
address why cities develop where they do, why some cities are large and others small,
what causes economic growth and decline, and how local governments affect urban
growth (O'Sullivan 2003:14). Because urban economics is concerned with asking
questions about the nature and workings of the economy of a city, models and techniques
developed within the field are primarily designed to analyze phenomena that are confined
within the limits of a single city (McCann 2001:2).
Land use
• Looking at land use within metropolitan areas, the urban economist seeks to analyze the
spatial organization of activities within cities. In attempts to explain observed patterns of
land use, the urban economist examines the intra-city location choices of firms and
households. Considering the spatial organization of activities within cities, urban
economics addresses questions in terms of what determines the price of land and why
those prices vary across space, the economic forces that caused the spread of employment
from the central core of cities outward, identifying land-use controls, such as zoning, and
interpreting how such controls affect the urban economy (O'Sullivan 2003:14).
Economic policy
• Economic policy is often implemented at the urban level thus economic policy is often
tied to urban policy (McCann 2001:3). Urban problems and public policy tie into
urban
4
