Cities Cover More and More of the Earth’s Land

The Lincoln Institute of Land Policy has a data set and a paper detailing land cover for a range of cities. They did good work on estimating the amount of land taken by those cities.

We created a new data set comprising the universe of all 3,649 named metropolitan agglomerations and cities that had populations in excess of 100,000 in the year 2000, their populations in that year, and their built-up area identified in the MOD500 map, currently the best satellite-based global map of urban land cover.

They find increasing rates of urban sprawl:

we found that average density in the built-up areas of a global sample of 120 cities declined at a mean annual rate of 2.0 percent between 1990 and 2000.

Land is more and more inefficiently used. In particular, “urban land cover in Sub Saharan African will increase more than 12-fold between 2000 and 2050.” So in fact as population grows the amount of land per capita increases over time.

The whole paper here.

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World Cup: Doha and the Economics of Supply and Demand

SoccerBallFootByBronskiBeat

Arabianbusiness reports that overall hotel capacity will need to be multiplied by 5 for the FIFA world cup in 2022. But that means a lot of unused hotel rooms post World Cup, and a 22% annual increase till then. 

The simple economics of supply and demand are at play here. Too many hotel rooms, little pricing power for the Doha hotel industry. 

“Although the recent growth of the tourism industry in Qatar has been robust, it will be difficult for the country to achieve the level of visitor growth which will garner enough demand to support a 400 percent expansion in the number of hotel rooms in eight years”

Even more troubling: when capacity is plentiful, prices tend to go down to the marginal cost of an additional room, and the overall ROI on the hotel project may be negative — with too much capacity, the price does not cover the cost of new capacity.

That will be a pretty cool case study for business school students. More here.

Are higher house prices good or bad?

Standard & Poor’s recent press release shows strong increases in house prices — double-digit annual increases. Some commentators hail this as a good thingBut few commentators notice that house price increases are not necessarily good for the economy. It is good for some people, but not for all.

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A paper in the Journal of Urban Economics — by Pat Bajari, Lanier Benkard, and John Krainer — suggests that house prices have little significant impact on overall welfare; rather the bigger welfare effects of house price appreciation are redistributive effects, transferring wealth from one part of the market to another. Households who are long on housing (own more than their desired level of housing services, e.g. landlords) tend to gain from house price appreciations; households who are short on housing (e.g. renters) tend to lose from house price appreciations. Hence the welfare impacts of house price appreciations are quite ambiguous. The Pat Bajari et al. paper suggests that house price appreciations had a negative welfare impact of $127 per year between 1984 and 1998.

So are house price increases good or bad? There doesn’t seem to be much reason to celebrate.

Bajari, Patrick, C. Lanier Benkard, and John Krainer. “House prices and consumer welfare.” Journal of Urban Economics 58.3 (2005): 474-487.