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MSB106 Applied Urban and Regional Economics

Course description for academic year 2021/2022

Contents and structure

This course adds to standard courses in micro- and macroeconomics by introducing an element of space. One set of topics to be discussed is related to location theory. The focus first is on how location decisions of firms are influenced by transport costs relative to the location of inputs and outputs, as well as of strategic decisions depending on the location of potential customers and competing firms. This includes the determination of market areas, as well as studying economies of agglomeration and clustering of economic activities. The course is also exploring central place theory, focussing on explaining and predicting changes in the urban hierarchy in a geography. In a regional policy perspective, centralization and urbanization issues are addressed, both in a firm location context and based on hypotheses of how different aspects of urban attraction affect residential location decisions, productivity and innovation. Another location issue is to study land use in urban areas, by using bid rent theory in discussing why and where different types of people and firms tend to cluster in space. Next, more macroeconomic approaches are used in economic impact analysis, to discuss the local impact of exogenous shocks in demand. This involves economic base modelling, interregional input-output models, and Keynesian multiplier models. As a natural extension, economic impact analysis is combined with basic ideas in location theory and several other contributions from standard economic theory to introduce the so-called new economic geography, and spatial computable general equilibrium models. The course is emphasizing both the theory underlying this type of models, and various applications of such a modelling framework in analysing regional development issues. The course will address different regional labour market issues, like regional disparities in unemployment rates and wages, and interregional migration. A recurring theme in the course will be to discuss the use of alternative measures to be used in applied analysis. This includes measures of regional disparities in different socio-economic variables, measures of diversity and of spatial clustering/dispersion tendencies, and measures of spatial autocorrelation. In addition, we will make simple use of methods (Geographical Information System; GIS) for visualization of spatial data. The different measures will be applied in case studies from for example south west Norway. An important part of the course will be to deal with theories of regional growth. This will first be done within traditional Keynesian and neoclassical approaches in a uniform-abstract space, before a diversified-relational space is introduced. In this framework, territorial competitiveness is discussed from different perspectives: the effect of growth poles, agglomeration economies, innovation and proximity. Theories of regional growth are also discussed in a setting with diversified-stylized space. Finally the course addresses problems specific to urban spatial structure.

Learning Outcome

Upon completion of the course, the students:

  • understand how the location decisions of firms reflect both cost considerations and strategic behaviour.
  • have specialized insight about how industrial activities are often clustered, and how geographies are typically organized in a hierarchical order of central places.
  • understand why and where different activities and household groups typically occupy different areas in an urban region, and how this is related to prices of land and housing.
  • have advanced knowledge of models for analyzing the local impact of exogenous shocks, spatial general equilibrium models, and the so-called new economic geography.
  • have a firm understanding of basic sources and different explanations for spatial inequalities in unemployment rates and wages.
  • have specialized insight of measures to describe, visualize, and evaluate aspects related to spatial inequalities, diversity, and how specific variables vary systematically across space.
  • have advanced knowledge of theories of regional growth.
  • have a firm understanding of what determines the urban spatial structure

Upon completion of the course, students:

  • can analyse and explain patterns of central places, as well as the land use and the variation in housing prices within an urban area
  • can analyze and deal critically with the local impact of exogenous demand shocks.
  • know how to use spatial general equilibrium models to predict how for instance changes in the transportation network affect the regional pattern of employment and population.
  • can analyze problems related to spatial disparities in unemployment and wages, and analyze the basic mechanisms underlying observed centralization and urbanization tendencies
  • can deal critically with various sources of information and various measures to evaluate the economic state and the economic growth of a region and an urban area.

Upon completion of the course, students:

  • can apply his/her knowledge to explain the spatial distribution of economic activities in a framework based on a general equilibrium way of thinking.
  • are equipped, overall, with analytical tools providing a firm understanding of key relationships in the economic policy debate related to urban and regional economic problems.
  • can apply his/her knowledge to suggest and evaluate alternative policy instruments to improve the economic situation in a local economy.
  • can apply his/her knowledge of regional labour markets to recommend suitable policy actions in cases with regional disparities in for instance unemployment rates.
  • can communicate both on a theoretical and on a practical level on issues related to economic situation and the economic growth in a region or an urban area.  

Entry requirements

Admission to Master of Science in Business

Recommended previous knowledge

Completed courses in Microeconomics, Macroeconomics, Statistics, and Mathematics, for instance from the Bachelor Degree program in Business Administration. 

Teaching methods

Traditional lectures will be complemented by seminars focussing on both literature reviews and on case studies related to relevant urban and regional issues in for example south west Norway. Organized in teams, students collect and process data, and write an assignment on the local economy, with reference to scientific articles on the problem under study. The seminars will provide hands on guidance on writing the assignment in the form of a research paper. 

Compulsory learning activities

Literature reviews and assignments based on data from the local economy. Seminars. 


Written exam, 5 hours.

Grading scale is A-F where F is fail.

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