EKONOMI KOTA

(PW1124)
FARID NURRAHMAN S.T.,M.SC
.
WHAT IS THE URBAN ECONOMIC
 Study of the location choices of firms and households or
how to place the economic activities in the form of land uses
allocation.
 Allocation results some questions on;
• Why cities exist
• Why they grow
• How different activities are arranged within the cities
• Spatial aspects of urban problems (poverty)
WHAT IS THE URBAN ECONOMIC
 Urban economics divides into 6 categories (sullivan 2003);
• Market forces in the development of cities
• Land use within cities
• Urban transportation
• Urban problems and public policy
• Housing and public policy
• Local government expenditures and taxes
Urban economics divides into 6 categories

 Market forces in the development of cities

• Why do cities exist
• Why are some cities so large, or small
• What causes urban economic growth and
decline
• How do local governments affect urban
economic growth
Urban economics divides into 6 categories
 Land use within cities
• What are the determinations of land prices
• Why are the households segregated with respect to
income
• What are the economic forces to make transformation
from monocentric to multicenter or others
• What are the motives of land use controls and their
effects to urban economy
Urban economics divides into 6 categories

Urban transportation
• What are the causes of congestion, what are the
alternative policy to respond
• Why do most transit authorities have large deficits
• Under which circumstances one alternative is much
better than other
• Are light rail system efficient
Urban economics divides into 6 categories

Urban problems and public policy

• About income, poverty, and their relationships with
other aspects of development
• Does the tendency of the poor settlement makes
them poorer
• Low education level and its strategies to improve it
• Higher crimes rate in cities
Urban economics divides into 6 categories

 Housing and public policy

• What makes housing different from other
commodities
• Why do the poor occupy used housing
• What are the market effects of housing policies
• What causes homelessness
Urban economics divides into 6 categories

 Local government expenditures and taxes

• What are the trade offs associated with the
fragmented system of local government
• Does a system of voting based on majority rule
produce efficient outcomes
• Is a local property tax regressive or progressive
• How do local governments respond to grants from
funder
CITIES AND ECONOMY
Is it possible to have no city How cities form
 Possible, if ;
 Equal productivity  Remember about west
 No scale economies in wild histories/movies
production
 No scale economies in  Kota Bandung
transportation (haryoto kunto)
•…
 Batavia
 Impossible; Trading
(barter system)  Surabaya
CITIES AND ECONOMY
CITIES AND ECONOMY
CITIES AND ECONOMY
 How cities growth  Key word:
 The works of multipliers
 The works of labor- AGGLOMERATION /
demand, labor-supply localization of
interaction
 The works of economic economic activities
scale (external (pure or
pecuniary), internal)
 The works of Keynesian
economic model
 ….
ECONOMIES OF SCALE
 The same as increasing returns to scale
 Refers to a situation in which an increase in the level of output
produced implies a decrease in the average costs per unit of output for
the firms

 Types;
• Internal economies of scale, the decrease of average costs is brought
about by an increase in the production level of the firms itself.
• External economies of scale, the decrease of average costs come about
through an output increase at the level of the industry as a whole
EXTERNAL ECONOMIES OF SCALE –
Scitovsky

Types;
 Pure external economies of scale, an increase in
industry-wide output alters the technological
relationship between input and output for each
individual firms

 Pecuniary External economies of scale, the decrease of

average costs come about through the effect of price
(equilibrium curve among stakeholders)
AGGLOMERATION
 Means that cost of reductions that occur because economic activity
is carried on at one place (Blair: 1995).
 Occurs when;
• Internal agglomeration economies
per unit cost reductions that accrue to a firm that expands its activity
at a particular place. benefits are captured by its own firms
• Linkages between pairs of business
met by forward and backward linkages among industries in a
particular place.
 more backward  primary production activities

 more forward final production activities

AGGLOMERATION
 Localization economies
• occurs when increases in the output of an entire group of
firms at a particular place result in lower costs for firms.
e. g. Industrial estate
 Types of localizations:
• Labor pools

• Specialized machinery

• Imitation, modification, and innovation

• Comparison shopping
QUESTION ?