The Costs of Agglomeration: House and Land Prices in French Cities

We develop a new methodology to estimate the elasticity of urban costs with respect to city population using French house and land price data. After handling a number of estimation concerns, we find that the elasticity of urban costs increases with city population with an estimate of about 0.03 for an urban area with 100,000 inhabitants to 0.08 for an urban area of the size of Paris. Our approach also yields a number of intermediate outputs of independent interest such as the share of housing in expenditure, the elasticity of unit house and land prices with respect to city population, and within-city distance gradients for house and land prices.