Urban Economics Final Exam Flashcards

Comprehensive vocabulary flashcards covering Urban Economics concepts including housing demand, policies, public goods, pollution, crime, and environmental justice based on Brueckner Chapters 6-11.

Owner User Cost (pre-tax)

calculated as $(i + h + d - g) \times v$, where $i$ is the mortgage rate, $h$ is the property tax rate, $d$ is depreciation, $g$ is capital gains, and $v$ is the per-unit price.

Socially Optimal Pollution

The level of pollution occurring where the marginal damage to residents equals the marginal benefit to the firm, represented as $MD(P^<em>) = MB(P^</em>)$.

Pigouvian Tax

A policy tool that sets a tax $t$ equal to the marginal damage at the social optimum ($t = MD(P^<em>)$), leading the firm to set $MB(P) = t$ and achieve $P^</em>$.

Public Good

A good that is both non-rivalrous (one person's use does not reduce another's) and non-excludable (non-payers cannot be excluded from use).

Public Good Optimum

The level of provision where the vertical sum of individual marginal benefits equals the marginal cost, expressed as $\sum MB(\text{individuals}) = MC$.

Composite Good

A term describing housing because its physical structure, location, and neighborhood characteristics are inseparably bundled together.

Wait-and-see Approach

The strategy households use for moving decisions due to high transaction costs, waiting until the gap between their ideal home value and current house is greater than or equal to the cost of moving.

Elasticity Approach

A method of estimating housing demand that treats housing as a single quantity and estimates price and income elasticities using aggregate market data.

Hedonic Approach

A method that treats housing as a bundle of attributes to isolate the implicit price of each individual characteristic (e.g., square footage, bathrooms) via regression.

Imputed Rent

The value of housing services consumed by owner-occupants, which is not taxed in the U.S. but is taxed in Germany.

Rent Control

A price ceiling on rents that creates a shortage, reduces new construction, leads to inadequate maintenance, and causes misallocation of housing units.

Income Grant (IG)

A cash subsidy that provides the highest utility gain for low-income households but results in the least amount of slum reduction.

Public Housing (PH)

A policy where the government builds units directly; it provides the most slum reduction but fell out of favor after the 1960s-70s due to concentrated crime and drug problems.

Stock-Flow Model

An economic model where 'Stock' represents existing units (inelastic in the short run) and 'Flow' represents new construction over time in response to price signals.

Local Public Good

A public good whose benefits are geographically confined, such as a school district or a police zone.

Median Voter

The individual whose preferred level of public goods wins under majority voting, which usually leads to a level different from the social optimum.

Tiebout Model

The 'vote with your feet' theory where individuals move to jurisdictions that match their preferred level of public goods and taxes.

Capitalization

The process where the value of public goods (like school quality) is reflected in housing prices; for example, a $5\%$ test score increase can raise house prices by $2.1\%$.

Environmental Kuznets Curve (EKC)

The theory that pollution rises with industrialization but falls once a certain income threshold is reached and abatement technologies are adopted.

Coasean Bargaining

A theory stating that if transaction costs are low and property rights are assigned, private parties can reach the social optimum without government intervention.

Cap & Trade

A system where the government issues a limited number of pollution rights which firms can trade, such as the Acid Rain Program.

Becker's Model (1968)

An economic theory of crime where individuals choose to commit crimes if the expected criminal income (loot multiplied by the probability of not being caught) exceeds legitimate income.

Roback Model

A two-sided spatial equilibrium model involving consumers and firms, used to create a Quality-of-Life Index by examining wages and housing prices relative to amenities.

Coming to the Nuisance

The best-supported EJ theory empirically, stating that low-income households move into polluted areas because those areas are cheaper and they have a lower willingness to pay for environmental quality.

Political Economy (EJ Theory)

A well-supported explanation for Environmental Justice issues suggesting the government enforces regulations less stringently and cleanups take longer in minority areas.