Interpreting cities

Name: Professor Gilles Duranton

Position: Noranda Chair in Economics and International Trade, held since 2004

Affiliation: Department of Economics

Education: PhD, London School of Economics

Areas of Expertise: Urban economics, international trade

Teaching

ECO421     Economics of Cities and Regions

ECO230     International Economic Institutions and Policy

ECO2302   International Economics: Theory and Institutions

Publications

– “Urban Evolutions: The Fast, the Slow, and the Still,” American Econ. Review 97 (1) (2007)

– “Labour Pooling, Labour Poaching and Spatial Clustering,” with Pierre-Philippe Combes, Regional Science and Urban Economics 36 (1) (2006)

Major Awards & Honours:

2007     Hewings Prize

2006     August Losch Prize

2004     Philip Leverhulme Prize

Can we anticipate the economic impact of roads, local taxes and larger cities?

Why are firms in larger cities more productive? Does a land transfer tax affect real estate values? Does building more roads improve traffic? Does it attract people? Gilles Duranton, the Noranda Chair in Economics and International Trade, has answers to all of these questions, and many of them are surprising.

Modern economies devote considerable resources to cars and roads, but little is known about their effects. In a widely cited study, Duranton showed that the total distance travelled by commuters increases proportionately to length of new roads. This implies that new roads do not alleviate traffic congestion after all, since their extra capacity is used up soon after it becomes available. Public transportation has no effect on traffic either since people who take the bus or the subway simply vacate a portion of the road that is quickly used by others. Therefore, since new roads in the US mainly yield extra capacity but do little to improve traffic conditions, they generally offer poor returns on investment.

Another puzzle in economic geography is the explanation for higher productivity in larger cities. Does this happen because these cities have larger markets where competition is tougher, or do firms in larger cities benefit from better exchanges of information and a thicker labour market? Or is there some other, more elusive explanation? Using French data, Duranton and his collaborators have shown that there is no evidence to support the market selection story. All firms appear to be more productive in larger cities. Furthermore, there is no evidence for “truncation at the bottom” in larger cities although, intriguingly, it does appear that productive firms do become relatively more productive when they are located in bigger cities.

In 2008, with U of T colleague Matt Turner, Duranton showed that the City of Toronto’s new land transfer tax of 1.1% caused a 15% decline in the number of sales and a decline in housing prices, which more or less cancelled out the levy’s new revenues.

Professor Durranton’s work also reaches beyond the North American context. He is researching the economic consequences of violence in Colombia and the long-term effects of the temporary stay of refugees in Tanzania.

The Noranda Chair in Economics and International Trade was created by The Edper Group Foundation in 1997, in memory of its founder Peter F Bronfman. Noranda Inc  is a member company of the Edper Group and a major producer and refiner of zinc, copper, aluminum and nickel.

Story by Brendan de Caires