Brookings-Wharton Papers on Urban Affairs 2005 (Brookings-Wharton Papers on Urban Affairs) (Brookings-Wharton Papers on Urban Affairs)

325 Pages·2006·3.42 MB·English

by  Gary Burtless

G
a bw
Designed to reach a wide audience of scholars and policymakers,the Brookings-Wharton Papers le
/R Brookings-Wharton
on Urban Affairsis an annual series that serves as a forum for cutting-edge,accessible research on o
t
h
urban policy.The editors seek to integrate broader research into the urban policy discussion by e
n
b
bringing urban studies scholars together with economists and researchers studying subjects with er papers
g
important urban implications. P
a
c
k
In this issue,six papers explore dilemmas faced by urban schools,including accountability,financ- on
U N
B
ing,influence of housing values,and student performance,as well as long-standing issues in r rba
urban analysis,such as income segregation and land use patterns. o
o a s
k ffair
Praise for i
n
Brookings-Wharton Papers on Urban Affairs g
s
-
“The first issue of the Brookings-Wharton Papers on Urban Affairsis one of the most exciting devel- W 2005
opments in years.The cross-fertilization between Brookings and academia has changed the course h
of American economics,making it much more practical and much more thoughtful.This journal will a
r
set the tone for urban economics for the coming decades.It will play a major role not only in acad-
t
emia,but also in ensuring that we have better urban economic policy.” o
n
—george akerlof,University of California,Berkeley

P
“Readers looking for a successful integration of systematic empirical studies and policy discussion a
p
should read the original papers in [the] inaugural volume of the Brookings-Wharton Papers on e
r
Urban Affairs.The clear thinking displayed in these papers is required to confront the social policy
s
challenges of our complex and changing metropolitan areas.” o
n
—william julius wilson,Lewis P.and Linda L.Geyser University Professor,Harvard University
U
r
b
a
william g. gale is the Arjay and Frances Fearing Miller Chair in Federal Economic Policy in
n
the Economic Studies program at the Brookings Institution.

A
janet rothenberg packis professor of public policy and management and real estate f
f
at the Wharton School,University of Pennsylvania. a
i
r
s
2
0
BROOKINGS INSTITUTION PRESS 0
5
Washington,D.C.
www.brookings.edu B Gary Burtless and Janet Rothenberg Pack
r
o
o
Cover design by Terry Patton Rhoads k Editors
in
g
s
2005
Gary Burtless and
Janet Rothenberg Pack
Editors
BROOKINGS INSTITUTION PRESS
Washington, D.C.
Copyright ©2005
THE BROOKINGS INSTITUTION
1775 Massachusetts Avenue, N.W., Washington, DC 20036
ISSN 1528-7084
ISBN 0-8157-1280-4
For information on subscriptions, standing orders, and individual copies, contact Brookings Institution
Press, P.O. Box 465, Hanover, PA17331- 0465. E-mail [email protected]. Or call 866-698-
0010. Visit Brookings online at http://bookstore.brookings.edu. Brookings periodicals are available online
through both Online Computer Library Center (contact OCLC subscriptions department at 800-848-5878,
ext. 6251) and Project Muse (http://muse.jhu.edu).
Authorization to photocopy items for internal or personal use or the internal or personal use of specific
clients is granted by the Brookings Institution for libraries and other users registered with the Copyright
Clearance Center Transactional Reporting Service, provided that the basic fee is paid to the Copyright
Clearance Center, 222 Rosewood Drive, Danvers, MA01923. For more information, please contact
CCC at 508-750-8400. This authorization does not extend to other kinds of copying, such as copying for
general distribution, or for creating new collective works, or for sale. Specific written permission for such
copying must be obtained from the Permissions Department, Brookings Institution Press, 1775 Massa-
chusetts Avenue, N.W., Washington, DC 20036; fax, 202-536-3623; e-mail, [email protected].
2005
Preface vii
Editors’Summary ix
Looking Back to Look Forward: Learning from Philadelphia’s
350 Years of Urban Development 1
JOSEPH GYOURKO
Comments by Robert A. Margo and Andrew F. Haughwout 43
Property Tax Limitations and Mobility: Lock-in Effect of
California’s Proposition 13 59
NADAWASIAND MICHELLE J. WHITE
Comments by Steven M. Sheffrin and Fernando Vendramel Ferreira 89
Higher Education Appropriations and Public Universities:
Role of Medicaid and the Business Cycle 99
THOMAS J. KANE, PETER R. ORSZAG, AND EMILAPOSTOLOV
Comments by Robert P. Inman and Andrew Reschovsky 128
Effects of Urban Rail Transit Expansions:
Evidence from Sixteen Cities, 1970–2000 147
NATHANIELBAUM-SNOWAND MATTHEW E. KAHN
Comment by Richard Voith 198
Migration within the United States: Role of Race-Ethnicity 207
WILLIAM H. FREYAND KAO-LEE LIAW
Comments by Richard Wright and Michael J. White 249
Growth of China’s Medium-Size Cities 263
J. VERNON HENDERSON
Comments by John R. Logan and Songsu Choi 296
Purpose The Brookings Papers on Urban Affairs is an annual publication
containing articles and formal discussant remarks from a conference
held at the Brookings Institution and arranged by the editors. The
annual forum and journal are the products of a collaboration
between the Brookings Institution’s Metropolitan Policy Program
and the Zell Lurie Real Estate Center at the Wharton School of the
University of Pennsylvania. All of the papers and discussant
remarks represent the views of the authors and not necessarily the
views of the staff members, officers, or trustees of the Brookings
Institution or the Wharton School of the University of Pennsylvania.
Coeditors Gary Burtless Brookings Institution
Janet Rothenberg Pack University of Pennsylvania
Staff Randi Bender Editorial Associate
Eric Haven Research Verifier
Advisers William Dickens Brookings Institution
Edward L. Glaeser Harvard University
Joseph E. Gyourko University of Pennsylvania
Robert Inman University of Pennsylvania
Bruce Katz Brookings Institution
Katherine M. O’Regan New York University
Alice M. Rivlin Brookings Institution
Contributors Emil Apostolov Brookings Institution
Nathaniel Baum-Snow University of Chicago
Songsu Choi World Bank
Fernando Vendramel Ferreira University of Pennsylvania
William H. Frey University of Michigan
Joseph Gyourko University of Pennsylvania
Andrew Haughwout New York Federal Reserve Bank
J. Vernon Henderson Brown University
Robert P. Inman University of Pennsylvania
Matthew E. Kahn Tufts University
Thomas J. Kane University of California–Los Angeles
Kao-Lee Liaw McMaster University
John R. Logan Brown University
Robert Margo Vanderbilt University
Peter R. Orszag Brookings Institution
Andrew Reschovsky University of Wisconsin
Steven M. Sheffrin University of California–Davis
Richard Voith Econsult
Nada Wasi University of California–San Diego
Michael J. White Brown University
Michelle J. White University of California–San Diego
Richard Wright Dartmouth College
Conference Andy Altman Anacostia Waterfront Corporation
Participants Alan Berube Brookings Institution
Ginnie Birch University of Pennsylvania
Xavier de Souza Briggs Massachusetts Institute of Technology
Victor Calanog University of Pennsylvania
Gerald Carlino Federal Reserve Bank of Philadelphia
Sam Chandan Dartmouth College
William Collins Vanderbilt University
Dylan Conger George Washington University
William Dickens Brookings Institution
Ingrid Gould Ellen New York University
William Gale Brookings Institution
David Garrison Brookings Institution
Edward Glaeser Harvard University
Rucker Johnson University of California–Berkeley
Helen F. Ladd Duke University
Janice Madden University of Pennsylvania
Therese McGuire Northwestern University
Rebecca Menes George Mason University
Carol O’Cleireacain Brookings Institution
Katherine O’Regan New York University
Robert Puentes Brookings Institution
John Quigley University of California–Berkeley
Steven Raphael University of California–Berkeley
Alice Rivlin Brookings Institution
Martha Ross Brookings Institution
Kim Rueben Urban Institute
Alberto Saiz University of Pennsylvania
Amy E. Schwartz New York University
Audrey Singer Brookings Institution
Anita Summers University of Pennsylvania
Joseph Tracy Federal Reserve Bank of New York
Jennifer Vey Brookings Institution
Jacob Vigdor Duke University
Susan Wachter University of Pennsylvania
William Wheaton Massachusetts Institute of Technology
Grace Wong University of Pennsylvania

Preface
Brookings-Wharton Papers on Urban Affairs is devoted to publishing
forward-looking research on urban policy issues in an accessible manner.
The collaboration between the Wharton School and the Brookings Institution
in this endeavor represents an effort to draw on resources and personnel in both
academia and the policy community. We hope and expect that the journal
itself will be of interest and use to an even wider audience that includes policy-
makers and their staffs, interested parties in the private sector, journalists,
students, and others.
The existence of this journal owes much to the efforts of key people at
Brookings and Wharton. At Brookings, President Strobe Talbott has contin-
ued to support this project. Bruce Katz, director of the Metropolitan Policy
Program, has been a tireless and vocal supporter of the journal and its
goals and provides major financial backing.
At Wharton, Peter Linneman and Joseph Gyourko, former director and cur-
rent director, respectively, of the Samuel Zell and Robert Lurie Real Estate
Center, have supported this undertaking intellectually and financially from
its inception. This year, the Wharton Dean’s Office and Institute for Urban
Research at the University of Pennsylvania (Eugenie Birch and Susan Wachter,
codirectors) have also provided financial support for the conference and vol-
ume. The dean’s office has also made a substantial contribution throughout this
period by freeing some of Janet Rothenberg Pack’s time to organize the confer-
ence and edit the volume. The Department of Business and Public Policy has in
numerous ways encouraged her participation in this endeavor.
This year, Gary Burtless, who holds the John C. and Nancy D. Whitehead
Chair in Economic Studies at Brookings, assumed the role of co-convener of
the conference and coeditor of the journal. His participation has made a major
contribution to the quality of both.
Several people made vital contributions to the publication of this volume
and the conference on which it is based. Saundra Honeysett at Brookings
vii
viii Brookings-Wharton Papers on Urban Affairs: 2005
organized conference logistics and managed the paper flow with efficiency
and good cheer. Amy Liu and Jamaine Fletcher provided valuable support at
many stages. The authors and discussants deserve special recognition for
making extra efforts to draft their arguments in a clear and accessible manner.
Eric Haven at Brookings has provided careful, comprehensive fact checking.
Janet Walker of the Brookings Institution Press has managed the production
of the conference volume both creatively and efficiently. And, finally, thanks
go to Randi Bender for copyediting.
Editors’Summary
Brookings-Wharton Papers on Urban Affairspresents new research on urban
economics to a broad audience of interested policy analysts and researchers.
The papers and comments contained in this volume, the sixth in the series,
were presented at a March 3–4, 2005, conference at the Brookings Institution.
The papers display a range of issues treated by contemporary urban econo-
mists, including a history of the rise and decline of Philadelphia’s economic
fortunes; the effects of California’s Proposition 13 on mobility; an analysis of
the effects of the business cycle and Medicaid costs on state appropriations
for higher education; interstate migration patterns in the United States; and
the role of migration restrictions, economic growth, and foreign direct invest-
ment in the development of China’s midsize cities.
Philadelphia is the fifth-largest city and center of the sixth-largest metro-
politan area in the United States. This relative position represents a consider-
able decline from the city’s preeminent position in earlier times. As Joseph
Gyourko documents in his historical survey, Looking Back to Look Forward:
Learning from Philadelphia’s 350 Years of Urban Development,the city was
the largest and economically most important in British North America
throughout most of the eighteenth century. New York supplanted Philadel-
phia as the leading U.S. trading and merchant center in the early nineteenth
century, but Philadelphia successfully reinvented itself as a center of highly
skilled manufacturing. The city was America’s most important source of
manufactured textiles in the period from the Revolutionary War through
1850. New technologies and industrialization also permitted Philadelphia to
produce metals and machinery, chemicals, and a variety of chemical-related
products. The shift from trading to manufacturing was possible because of
entrepreneurs’ ability to exploit the city’s large pool of local capital and
skilled artisans as well as the development and pioneering use of steam power
in production. Philadelphia had survived a major economic shock—its
ix