Our researcher Marc Teignier, together with Nicolas Coeurdacier (Sciences Po Paris, CEPR) and Florian Oswald (University of Turin, ESOMAS, Collegio Carlo Alberto), has published the article “Structural Change, Land Use and Urban Expansion” in The Review of Economic Studies, one of the world’s leading academic journals in economics.
The study addresses a central question in economic development: how do cities grow during the process of structural transformation? To answer this, the authors build a multi-sector spatial equilibrium model in which land can be used for either agriculture or housing. Urban land expands out of agricultural land as productivity rises and labor shifts away from the rural sector.
Their findings reveal that in economies with low agricultural productivity and high subsistence needs, farmland is expensive, housing is scarce, and cities are highly dense. As productivity increases, fewer resources are required in agriculture, freeing land for urban expansion. This process allows cities to grow faster in area than in population, leading to a persistent decline in average urban density—a trend that matches historical data.
Calibrating the model to 180 years of French data, the paper explains much of the long-run evolution of urban areas, population density, and land values. In France, for instance, while the population of major cities has increased nearly fourfold since 1870, their total area has expanded by a factor of thirty, reducing average density by roughly eightfold.
The research highlights the crucial role of agricultural productivity and land values in shaping urban form. The price of farmland at the urban fringe determines the opportunity cost of expanding cities: when farmland is expensive, cities remain compact; as agricultural productivity improves, land becomes relatively cheaper and urban areas sprawl outward. This mechanism complements the traditional urban economics view that urban sprawl results primarily from improvements in commuting technologies.
Finally, the paper sheds new light on the joint evolution of urban density, land values, and housing prices throughout the process of economic development. It shows that during periods of rapid structural change, city expansion can offset rising housing demand, stabilizing prices. Once structural change slows, however, land values and housing prices begin to rise sharply—a pattern consistent with historical evidence for France and other advanced economies.
Congratulations to Marc Teignier for this outstanding publication and the contribution to the field of economics!
