Becker Friedman Institute
for Research in Economics
The University of Chicago

Research. Insights. Impact. Advancing the Legacy of Chicago Economics.

Urban Revival in America, 2000 to 2010

May 2017
Victor Couture, Jessie Handbury

This paper documents and explains the striking reversal of fortune of urban America from 2000 to 2010. We show that almost all large American cities have experienced rising numbers in young professionals near their city center over the last decade. We assemble a rich database at a fine spatial scale to test a number of competing hypotheses explaining this recent trend. We first estimate a residential choice model to assess the relative roles of amenities, job locations, and housing prices in drawing the young and college-educated downtown. We find that initial conditions of non-tradable service amenities explain the diverging location decisions of the young and college-educated relative to their non-college-educated peers and their older college-educated counterparts. The coefficients on these initial conditions suggest that preferences for these amenities are changing over time. We investigate this hypothesis using complementary datasets, where we find that non-tradable service amenities are also playing an increasingly dominant role in the expenditure and travel decisions of the young and college-educated relative to other groups. Finally, we show that these new trends are partially explained by the changing income composition and family structure of the young and college-educated and strongly related to opportunities to network and socialize with other young professionals.