Cities and the Urban Land Premium

In Cities and the Urban Land Premium Henri de Groot, Gerard Marlet, Coen Teulings and Wouter Vermeulen they map out differences in land prices and wages across cities and rural areas in the Netherlands. In doing so they explore and illustrate how land prices in cities reflect not only the production side of the economy but also the consumption side (shops, cultural activities and a historic city centre, for example), which make some cities more attractive than others. In particular the authors flesh out the analysis by CPB Netherlands Bureau for Economic Policy Analysis of the meaning of location for economic activity.

Chapter 1 commences by briefly setting the scene regarding cities and where and how they have developed over time. It especially notes how land prices reflect the process of agglomeration in cities and therefore the centrality of land prices to this book (page 9).

Chapter 2 proceeds to look at how the popularity of a place is reflected in land value and prices, typically leading to higher population densities and high-rise buildings (pages 11 and 19). Using land prices and commuter flows, the authors analyse Dutch cities according to the monocentric consumer city concept and find it fits reasonably well (page 20).

Chapter 3 reviews the dynamics of the Dutch system of cities. de Groot and co-authors analyse the Netherlands according to Zipf’s Law (the rank size rule) and find that the size of Dutch cities is levelling out (page 31). In connection to this the authors assess location quotients to illustrate how industries are spatially distributed around the Netherlands (page 36).

The fourth chapter, “The production city”, focuses on regional wage differences in the Netherlands and how these can be explained. Using micro-data from CBS Statistics Netherlands, de Groot et al. map out the productivity effects of urbanization and conclude that not all land price differences are attributed to higher productivity (pages 41 and 56).

Chapter 5 builds upon the idea that “a part of the land price difference must, therefore, be ascribed to local amenities, or the consumer side of the city” (page 56) and also the selection of jobs available within an acceptable travel time (page 60). In Chapter 6 the authors tackle the issue of land prices and governmental policy – in particular, discussing land value surplus.

Chapter 7 centres on answering when it is useful to relax spatial planning policy as an “alternative way to draw more workers to the city”, so that it is the use of land and not wages that is subsidized (page 99). The authors turn to the instrument of social cost-benefit analysis (SCBA) for area development in Chapter 8 and draw upon experience from SCBA of the Waal riverfront in Nijmegen (page 113).

To conclude, in Chapter 9 de Groot and colleagues reiterate the importance of location upon land prices, and review the implications of their theoretical and empirical findings for future planning and policy agendas (page 124).

This book provides specific insight into the case of the Netherlands. It is written in such a way as to be accessible to a wide audience (by avoiding complex equations or copious references), and is an interesting resource for understanding the spatial distribution of land prices.

Book note prepared by Hannah Keren Lee