CENTRAL CITIES AND SUBURBS: ECONOMIC RIVALS OR ALLIES?

Theoretical models of urban development come to contradictory conclusions regarding the nature of central city-suburb interdependence. Unfortunately, empirical research into this relationship has been hampered by the lack of identifying information due to the endogeneity of factors affecting both central city and suburban growth. This paper resolves the identification problem by constructing an index that measures price shocks to export industries located in either center cities or their suburbs. The results indicate that positive export industry price shocks to one area have a positive spillover effect on the other. Interestingly, the cross-elasticity of suburban employment with respect to center city employment (1.18) significantly exceeds the cross-elasticity of central city employment with respect to suburban employment (0.24).