Building functional cities.

The literature views many African cities as dysfunctional with a hodgepodge of land uses and poor "connectivity." One driver of inefficient land uses is construction decisions for highly durable buildings made under weak institutions. In a novel approach, we model the dynamics of urban land use with both formal and slum dwellings and ongoing urban redevelopment to higher building heights in the formal sector as a city grows. We analyze the evolution of Nairobi using a unique high-spatial resolution data set. The analysis suggests insufficient building volume through most of the city and large slum areas with low housing volumes near the center, where corrupted institutions deter conversion to formal sector usage.

The dynamics of city formation.

This paper examines city formation in a country whose urban population is growing steadily over time, with new cities required to accommodate this growth. In contrast to most of the literature there is immobility of housing and urban infrastructure, and investment in these assets is taken on the basis of forward-looking behavior. In the presence of these fixed assets cities form sequentially, without the population swings in existing cities that arise in current models, but with swings in house rents. Equilibrium city size, absent government, may be larger or smaller than is efficient, depending on how urban externalities vary with population. Efficient formation of cities with internalization of externalities involves local government intervention and borrowing to finance development. The paper explores the institutions required for successful local government intervention.