Two essays on urban economics

Abstract

The first chapter of the thesis investigates the cause of the positive relationship between population density and school enrollment rate. In developing countries, school enrollment rates are broadly higher in regions with higher population density. Using the junior secondary school attendance data from the 2000 census in China, I find that higher school density, which lowers the traveling cost of schooling, is the reason behind this phenomenon. Results of panel data analysis and instrumental variables estimation support the causal effects of population and school density on school enrollment rate. While school density has a significant effect on the school enrollment of students living in rural areas, students in the urban areas are unlikely to dropout from schools due to school availability. The results of this chapter provide a new explanation for the correlation between the urbanization rate and the economic development of a region. The second chapter of the thesis demonstrates a spatial sorting model in which the productivity of workers in a city is affected by its legacy human capital - the number of high-skilled workers located in the city in the past. Analytical results show that the ranking of population size of a city depends on the ranking of its legacy human capital, which is constant over time. The share of high-skilled workers and the wage premium are higher in larger cities in my model, which is consistent with many empirical findings in the Urban Economics literature. Using the data of US metropolitan areas, my model can match with the empirical pattern of the city size distribution in US. Simulation results predict that the city size distribution in US will remain invariant in the coming decades, while the monotonic relationship between intra-city inequality and city size will strengthen in case the skill-biased technological change continues.