Suburban Sub-centers and employment density in metropolitan Chicago

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Suburban Sub-centers and employment density in
metropolitan Chicago

• Daniel P. McMillen (Tulane U)
• John F. McDonald (U of Illinois)
• Journal of Urban Eco, 1998

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Introduction (1)

• A location well served by highways, rail lines
  and other transportation network may attract many
  firms even when the firms have no interest in
  locating near one another ---- suburban
  sub-center may form near transportation centers.
  Accessibility to these sub-centers lead to
  employment concentration. This implies that scale
  economies -- agglomeration (transportation saving
  cost) can generate concentration of employment at
  certain locations within an urban area.

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Scale Economies - transportation network

• Transportation network

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Theoretic Framework

• Bid-rent function is used to see effects of
  suburban sub-center on employment density. A
  bid-rent function represents the maximum amount a
  firm or an individual will pay for a unit of
  land. In standard mono-centric model, the
  bid-rent function is a simple function of
  distance from the city center -- because all
  economic activities is assumed to take place
  there. Here, sub-urban employment is influenced
  by access to expressway interchanges and other
  features of the transportation network. (cont)

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Theoretic Framework (2)

• Such accessibility measures are represented by
  the vector A, sub-center access measures by
  vector S and idiosyncratic characteristics
  (clear, level land, swampy) by C, this affects
  construction cost.
• Hypothesis
• Employment probability in the sub-centers
• Their impact on employment density

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Methodology

• Non-residential lnR1 ?1X ?1 X (A,S,C)
• Household lnR2 ?2X ?2
• Net employment density ln(E/Le) ?ln R1 ?1
  ??1X ?1 ??1
• Gross employment lnD ?Z ? ------ (1)
• Employment density is a function of the same
  variables that determine land rents.
• Employment density increases when non-residential
  land rent increases

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Methodology (2)

• Employment density increases when non-residential
  land rent increases
• Employment density decreases when residential
  land rent increases
• Prob (I1) Prob ( ?Z ? gt 0 ) ------- (2)
• This equation determines whether there is some
  employment in a zone or not.
• Correlation between ? and ? implies employment
  density functions are subject to selection bias.

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Estimation Procedure

• Two-stage method a) probit/logit b) OLS
• Maximum-likelihood estimation
• E (lnD/I1) ? Z ??u ? (? Z) / ? (? Z)
• Northeastern Illinois Planning Commission data
• Sub-center identification A set of nearby tracts
  that each have at least 10 employee/acre in
  either 1980 or 1990 and together have an average
  over the 2 sample years of at least 10,000
  employees ---20 sub-centers

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Estimation Results

• Expect Increasing distance from a suburban
  employment sub-center lowers non-residential bid
  rents if scale economies exist --- lower
  employment density -- negative coefficient on
  distance ---- lower employment

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Estimation Results (2)
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Estimation Results (3)
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Conclusion

• Correlation between errors of employment density
  and employment probability exists ---OLS
  estimates are subject to selection bias -- either
  two-stage method or maximum likelihood is
  appropriate.
• Transportation facilities are subject to
  economies of scale. Firms will cluster near
  transportation facilities even if there are no
  direct benefits of locating near one another. The
  empirical results show that the measures of
  access to the transportation system are highly
  statistically significant determinants of both
  employment probability and employment density.

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Thank you

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