Home to the Urban InstituteUrban Change in the United States and Western Europe: Comparative Analysis and Policy


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Chapter One

"Urban America and Urban Western Europe: Are They Different?"

Anita A. Summers

The answer to the question posed in the chapter title is: yes, they are different, mostly because of the very different relationships between central and local governments in the United States and Western Europe. This was the answer reached in the first edition of this book (1993), and it has now been substantially reinforced by the data and analysis of urban patterns on both continents since then. This second edition takes the baseline studies of 1990, updates the data, and reanalyzes the conclusions.

The 1990 conference in Bellagio, Italy, on "Comparisons of Urban Economic Development in the United States and Western Europe, 1950-87" was an effort to improve understanding of the efficacy of urban policies by telling a cohesive tale of the cities on two continents. This conference produced the chapters for the first edition of this book, focusing on the basic question: What can be learned by a rigorous comparison of the patterns and processes of urban concentrations of residents and employment in Western Europe and the United States? Participants analyzed this issue with particular emphasis on the role and effectiveness of public policy. A wide range of methodological techniques was used—economic theory, econometrics, general economic analysis, regional science, and institutional historical analysis. Fifteen to twenty years ago, analyses of transportation and land-use issues would have dominated such a conference, but by 1990 there was full recognition of the multiplicity of factors—political, social, and economic—underlying urban location decisions. This second edition, updating the data and conclusions of most of the conference papers and, in two cases, putting in entirely new chapters, underscores that reality.

Among the striking conclusions that have emerged from the conference and this update are the following: (1) There are clear similarities in the contemporary patterns and problems of urban areas between the United States and Western Europe, but wide disparity in the intensity of the distributional problems. (2) Government has and continues to affect the patterns and problems in urban areas on both continents. (3) The policies undertaken by governments in Western Europe are very different from those taken in the United States. (4) The Europeans institutionalize the fact that they comprise many cultures and countries into models of disequilibrium among their urban areas. The Americans—though steeped in the neoclassical traditions of equilibrium—frequently see disequilibrium within theirs.

The contributions to this volume reveal three very visible commonalities in the interpretation of urban economic processes in Western Europe and the United States. Virtually all authors converge on the role and potential effectiveness of government policies in influencing the visible patterns of urban and regional growth. Almost every author sees changes—similar on both continents—in the size and structure of urban areas. And, though the Europeans and Americans differ in their intellectual traditions concerning the ability of urban areas across the map to converge in their state of economic health, they are not far apart in seeing "permanent" disequilibrium, in the absence of intervention.


The reality of the dominance of market forces in influencing the location concentrations of people and jobs is recognized in this volume by analysts on both sides of the Atlantic—as is the desirability of the individual freedom of choice underlying that reality. But every author (with the exception of Edwin S. Mills, in chapter 6) agrees on the desirability of a strong role for the national government in effecting changes in the economic and social patterns of subnational governments. The Europeans argue in favor of this position because, on the whole, there is no significant economic power in the hands of local government (though Leo van den Berg, in chapter 17, advocates assigning more strength to local government), and they believe this distribution of responsibilities has served them well in many respects. The Americans (except Mills), because the absence of a strategic national urban policy has coincided with severe fiscal and social problems in the largest cities, point to the inability and failure of state and local policies to cope with central-city crises.

However, both Europeans and Americans point out the negative impact of some national policies on central cities—particularly the low-income housing concentrations that were an integral part of many national urban policies, and the fragmented fiscal structure of metropolitan areas in the United States. Anthony Downs (chapter 2), Peter D. Linneman and Anita A. Summers (chapter 4), Helen F. Ladd (chapter 11), Mark Alan Hughes and Anaïs Loizillon (chapter 13), and Dick Netzer (chapter 14) argue for national involvement with the national public good responsibilities that are now being handled by cities, and particularly those derived from the concentrations of poverty. Lanfranco Senn and Gianluigi Gorla, in chapter 8, make the same public good argument with respect to other types of benefits that would derive from collaboration among local governments.

The analyses by Ladd, Joseph Gyourko and Joseph Tracy (chapter 12), and Netzer show clearly the links between the types of population that tend to concentrate in American cities and the fiscal problems of these cities. Most of the large cities of the United States have relatively high concentrations of people in poverty, many of them immigrants. In essence, in the United States, large cities are major caretakers of the nation's poor and immigrants, enabling the rest of the country to become more removed from the disamenities of poverty. In the political economist's lingo, the nation as a whole is the beneficiary of some of the services that cities are delivering and paying for from their own tax base—but the nation is not paying for much of those costs. In Europe—as is particularly clear in the discussions by John B. Parr (chapter 7), Rainer Mackensen (chapter 10), and Duncan Maclennan (chapter 16)—the significant centralization of economic responsibility for subnational governments has been a factor in explaining why their cities have not suffered as much as those in America, though Maclennan emphasizes the recent evidence that social housing has worsened the economic strength of central cores.

The fiscal relationships among various levels of government—comprising the fiscal federalist structure—are not the only government policies emphasized in this volume as being influential and effective. Every chapter, to some degree, points to the important role of infrastructure, in terms of both amount and quality. Downs, Paul C. Cheshire (chapters 5 and 19), Parr, Maclennan, and van den Berg particularly stress this role for European nations; and Downs, Linneman and Summers, Hughes and Loizillon, and Netzer emphasize this role for the United States. Downs concludes that the influential role of infrastructure is the same on both continents, but that the relatively shabby state of American cities is, in part, due to the relatively low rates of spending on infrastructure in the past.

Other government policies are regarded as highly significant by several scholars, Peter Hall (chapter 3) argues for a set of regionally based industrial policies to foster high-tech manufacturing sectors, encourage the producer services sections, and attack factors underlying work force polarization. His policy proposals are directed at helping the winners, led by demand. Michael I. Luger (chapter 15) examines the regional development of high-tech industries in the United States and advocates a national mechanism for allocating technology assistance (a winner industry) to reduce regional disparities. Mills, on the other hand, contends that only markets, not governments, can pick winners. Van den Berg also advocates demand, led by policies.

There is considerable documentation of the attractiveness of employment in locations with a higher quality of life—Cheshire, Mackensen, and van den Berg note this for Europe, as do Linneman and Summers, and Gyourko and Tracy for the United States. Hughes argues that effective labor mobility policies can expand the employment opportunities for those living in the parts of metropolitan areas with fewer amenities.

Two American authors argue that particular types of regulatory restrictions are impediments to economic development. Downs asserts that zoning restrictions impede intrametropolitan mobility—thus keeping the poor concentrated in the central cities; Mills argues that central cities overregulate business, the effect of which is to raise costs because of production rigidities, making it more attractive for business to locate outside central cities. Cheshire, in his postscript chapter 19, argues that land use regulation in the United States has accentuated urban decentralization, whereas in the United Kingdom it has not only substantially increased land costs but has produced a form of concentrated deconcentration by generating detached high-density exurbs. Linneman and Summers were not able to establish any econometrically robust link between regulatory practices and employment. (It is noteworthy that, although elected officials and the media—particularly in the United States and the United Kingdom—assume the clear positive impact of defense procurement allocation decisions, there is little hard evidence to substantiate that view. Linneman and Summers did examine this question for American metropolitan areas, and found some evidence, though not strong, for these hypothesized positive effects.)

Though the dominant role of markets in the determination of the location of people and jobs is underscored by all the authors, confidence in the ability of government policies to influence regional economic development is expressed in most of the chapters. Some stress allocations related to the low-income concentrations in cities (Downs, Ladd, Hughes, Netzer, van den Berg); some stress the importance of infrastructure investment (Downs, Hall, Cheshire, Parr, Hughes); some stress investing in urban amenities (Cheshire, Gyourko and Tracy, van den Berg); some advocate targeted industrial assistance (Hall, Luger); and some emphasize the importance of a strategic housing policy (Downs, Netzer, Maclennan). This volume's contributors agree, in general, with the importance of the central government in implementing these policies, but several authors emphasize the importance of subnational government policy (Gyourko and Tracy, Luger, van den Berg).

A somewhat overgeneralized summary of the positions of the contributing scholars might be that the Europeans stress the efficacy of "hard" instruments for urban policy—tangible physical infrastructure such as housing and transportation networks—and that the Americans stress the efficacy of "soft" instruments—assistance in the form of welfare grants, educational expenditures, and health insurance. In terms of future planning, this is probably relevant information for both groups. In Europe, the coming of age of the European Union is bringing with it more mobility among member nations' urban areas—and with it, the increased concentrations of the poor so apparent in the United States. In chapter 10, Rainer Mackensen, taking a broad historical sweep, suggests that some of this is already visible. If so, the bitter lessons learned in America in the last few decades may provide a how-not-to-do-it textbook. The crisis state of many of the largest United States cities coincided with the decision not to have a national urban policy. On the other hand, the European success with centralized regional financing and policymaking could provide a how-to-do-it textbook. It will be interesting to see how far the European proposed action plan for European cities embodies these lessons.


Two major topics addressed in detail in this volume relate to the changing structure of urban areas in Western Europe and the United States. First, on both continents, the structure of these areas has changed significantly over the last few decades, as measured by employment and population characteristics. Second, the need for a functional definition of an urban area, and the lack of coincidence between legal and functional boundaries, is recognized by all the authors in one way or another. A number of chapters include conceptual and empirical discussions of the measurement problems in the analyses of subnational areas that arise from this difficulty. Much commonality emerges here between the European and American experiences: population and jobs deconcentrated away from central cities in the 1960s and 1970s, and have continued to do so in many American cities; there are relatively more poor people in the central cities, though this is much more true of the United States and there are contrary cases in Europe; the standard, legally defined metropolitan areas no longer define the realities of the urban network; and government data available for regions do not allow analysis of these changed realities.

Chapters 4, 5, 9, and 10, Linneman and Summers, Cheshire, Leven, and Mackensen respectively, provide the primary sources for the empirical analysis of the decentralization of population and employment from the urban areas in Europe and the United States. Linneman and Summers analyze 60 areas (called PMSAs, primary metropolitan statistical areas) and Cheshire analyzes 117 European urban concentrations (called FURS, functional urban regions). Both chapters document the movement away from central cities, and both of their econometric analyses support the hypotheses that the poor quality of the urban infrastructure, the concentration of employment in declining industries, and large size have been important explanations of this pattern. Cheshire emerges from the analysis somewhat optimistic about the future of many European cities because of the reduced transportation costs activated by the developing European Union. Linneman and Summers see no such basis for optimism about America's central cities; they expect smaller central cities to be fixed features of the metropolitan landscape. Several other scholars document this decentralization and the associated decline of major cities—Downs, Mackensen, Ladd, Hughes, and Netzer. The American contributors are greatly concerned with the socioeconomic implications of the changed metropolitan map—Ladd, Hughes, and Netzer, particularly. But the Europeans are also worrying—Mackensen and Maclennan, particularly. The postscript chapter by Cheshire updates the analysis further. It shows that patterns became more varied during the 1980s and early 1990s, with some relative recentralization in many cities, and absolute recentralization in some. His analysis suggests that future patterns may be more varied—although cities in the United States are likely to continue to decentralize because of their inherited characteristics and the institutional constraints within which they operate.

One element that muddies the waters of much academic and media discussion of urban issues is the absence of a meticulous designation of the area under discussion—Are we discussing a legally bound jurisdiction called a city or an analytically determined (or government-data-agency-determined) nonlegally bound metropolitan area in which the central city is a core civil division? Virtually all the contributors reach for some sort of functional definition of subnational urban areas. However, clear pragmatic considerations impede the implementation of such a concept by the compilers of statistics. Functions change over time, and this implies periodic changes in the definition of the area concerned.

The European contributors to this volume have been concerned for some time about this issue, apart from the more recent stimulus presented by the rise of European Union. Senn and Gorla argue for the need of a wider concept of metropolitan areas and of how they interact, claiming that—because of networking benefits—the social benefits of a functionally defined metropolitan area are greater than the sum of the individual benefits. Parr argues that we are understating metropolitan area growth by using boundaries that are no longer functionally accurate—we are not including the peripheral areas that, in fact, are attached to the former core. Cheshire and van den Berg use the concept of functional urban regions. And Maclennan argues that planning policies which enable markets, not displace them, can produce a more harmonious income profile.

The American contributors, despite a growing awareness of the limitations of the PMSA unit of analysis—which does not embrace communities that are clearly large, clearly growing, and clearly attached—focus on the problems arising within the defined metropolitan areas. Ladd analyzes the severe fiscal problems of cities arising from their disconnected tax bases; Linneman and Summers document the very different patterns of growth and population characteristics between central cities and their suburbs and between central business districts and the rest of the central city; and Hughes documents the immobility of central city labor markets, even to the close suburban employment opportunities. Mills's analysis accepts the legal size constraints, and, given that assumption, argues that in the future the smaller metropolitan areas will fare better.

Four of the contributors, as they wrestle with these definitional concerns, actually assemble new data to match their interests. Cheshire develops a measure of local welfare primarily to inform the analysis of the processes of urban change; Gyourko and Tracy develop new local measures of the quality of life that incorporate fiscal characteristics of the community; Hughes creates measures of employment accessibility to enhance understanding of the relative immobility of some city residents; and Linneman and Summers construct disaggregated employment and population data on central business districts versus the rest of the central city and on individual suburbs, as well as measurements of the local regulatory climate for cities and suburban jurisdictions.

Without question, the authors of this book fully recognize that the ability to assess the socioeconomic patterns of metropolitan areas is hampered by the various constraints on the geographic area that can be included. These constraints are imposed by the frequent unavailability of regional data, the interest in analyzing a constantly defined area over time, the constitutional definitions of boundaries and responsibilities—and perhaps, also, the slow pace at which we recognize changed realities. New communications technology and new transportation networks have expanded the size and altered the landscape of urban centers. Clearly it will be essential—if we are to understand and influence these patterns—to develop empirical bases that incorporate new areas and that are sufficiently disaggregated to allow for the required flexibility to adjust to changed and changing transactions costs.


Wide differences exist in the state of economic and social health between and within metropolitan areas in the United States, and between and within metropolitan areas in Western Europe.

In the United States, annual employment growth rates among the largest PMSAs between 1980 and 1986 varied from a low of -5.0 percent (Gary, Indiana) to a high +8.2 percent (Orlando, Florida); annual population growth rates between 1980 and 1987 varied from a low of -0.7 percent (Youngstown, Ohio) to +3.9 percent (Phoenix, Arizona); for the same periods, the median annual employment growth rates in the center cities of the sixty largest metropolitan areas were +1.7 percent, compared with +3.3 percent in their suburbs; and the median annual population growth rate was +0.5 percent in the cities, in contrast to +1.9 percent in their suburbs. These patterns were sustained ones (data from Linneman and Summers, chapter 4, this volume). In Europe, in the Benelux countries, 60 percent of the urban cores were losing population between 1971 and 1981, but only 40 percent had population losses in 1981-91; in Germany the ratios changed from 78 percent to 35 percent, in Italy from 56 percent to 17 percent, and in the U.K. from 92 percent to 89 percent—but in France, the ratios increased from 18 percent to 29 percent, and, in Spain, from 0 percent to 34 percent (data from Cheshire, chapter 19). The balance of losers to gainers shifted for reasons Cheshire analyzes, but losing was still a significant pattern.

Neoclassical analysis would lead one to conclude that, if the factors of production are mobile (as is assumed to be characteristic of market economies), the state of health of urban areas in a country should tend to converge, to equilibrate. Western Europe, of course, consists of many countries and many cultures, so the mobility of factors of production is clearly restricted. Presumably, the developing strength of the European Union will make their urban areas more similar in this respect in the long run. It is not surprising, therefore, that European analysts, steeped in the Kaldor institutionalist tradition and reinforced by recent work, see spatial disequilibrium as they study urban maps. Van den Berg's dynamic modeling of the stages of metropolitan area growth reflects acceptance of their disequilibrium character. Downs regards the relatively slow migration response in Western Europe as a major disequilibrating factor, as does Mackensen. Cheshire does not view the equilibrating process of capitalization of quality-of-life characteristics as a valid description for Europe—his analysis reveals very different degrees of adaptiveness in the 117 urban areas he studies, and this adaptiveness can be redefined as a measurement of the capacity to equilibrate. Maclennan sees minimal intraurban mobility, arguing that there will be disequilibrium without government policy, as does Hughes. Senn and Gorla regard the expanding networks among urban areas as an equilibrating force, but they also see the hierarchical characteristics of cities—their economic, political, and cultural concentrations of power—as major forces in continuing disequilibrium; Mackensen argues similarly; and Parr's reading of the evidence is that a narrow geographic definition of metropolitan areas suggests disequilibrium, but that a broader definition would not.

In the United States, on the other hand, though the neoclassical tradition has dominated, there is far from universal confidence that there can be equilibration—and in the eyes of several of this volume's contributors, that confidence has disappeared. Mills's study of the determinants of the size and growth of metropolitan areas is explicitly grounded in general equilibrium analysis; Downs sees interurban homogeneity—equilibration—but intraurban diversity; and Leven discusses the equilibrating influence of increased labor mobility in the United States. But the other writers see much disequilibrium: Hall assumes spatial disequilibrium as he argues for the need to move urban economies out of their declining sectors; Parr, as well as Linneman and Summers and Hughes, documents the spatial disequilibrium within metropolitan areas; Netzer, in arguing for a stronger role for the federal government in reducing disparities among urban areas, accepts the "stickiness" of the snapshot of their divergence; Ladd sees the need to alter federal aid and procurement policies to reduce intermetropolitan disparities, and views the fixed intrametropolitan disequilibrium as the major cause of the poor fiscal health of center cities; and Luger finds that government's support of high-technology programs has had the effect of increasing regional disparities.

European and American analysts converge in finding the strength and fixity of disequilibrium among and within metropolitan areas—though there is not unanimity. Grounded in institutional theory, the European experience continues to document the persistence of disparities. The Americans, though they are grounded in the neoclassical tradition, see the persistence of extreme disparities and their consequences.


The chapters in this volume contain separate analyses by authors from different countries using different data and different theory. But despite divergencies in perspective, methodology, and conclusions, there is agreement that urban landscapes have shown deconcentration from the central cores, that widely varying socioeconomic profiles of jobs and residents emerge and persist within and among metropolitan areas, that these disparities give rise to significant socioeconomic problems, and that central government policies have the potential to have some effective impact on these patterns.

The four studies in Part I are grouped under the title "Intra- and Intermetropolitan Area Change: Evidence and Strategies." In the opening chapter, Anthony Downs's analysis of the contrasting strategies shaping metropolitan economic development in the United States and Western Europe concludes that the lesson for the United States is that economic development strategies will not solve all urban problems, and that the lesson for Europe is that the European Union may bring more interurban homogeneity. Peter Hall, in the chapter following, identifies policies that might help cities move from their declining industries to expanding ones. He integrates the view that locational decisions should be left entirely to the market, with the view that there are significant social costs to urban decline, by focusing on the desirability of supporting research and development for new industries in their innovative stage. The last two chapters are both heavily empirical analyses of urban economic development patterns. Peter Linneman and Anita Summers document the change from increased independence of suburbs from cities in the United States to greater dependence of suburbs on the health of their urban cores, as well as the need for a federal strategic urban policy. Paul Cheshire develops measurements of local welfare and explains the differences in those measures across Western European urban areas, in welfare levels, if not in form. He sees some bases for expecting more convergence among European urban areas: the European Union, the growth of service employment, and the emphasis on adaptiveness. And he sees some evidence of the reality of these expectations.

Part II, "The Dynamics of Metropolitan Area Change: Theory and Evidence," contains five chapters. Edwin Mills analyzes the determinants of the size and growth of metropolitan areas in the United States and concludes that the smaller areas are likely to function better because they can reap the efficiencies of agglomeration without the diseconomies of very large scale. John Parr's analysis focuses on the importance of considering the wider region—the metropolitan area as typically configured plus the nonmetropolitan zone surrounding it—to understand why metropolitan regions will continue to grow. Lanfranco Senn and Gianluigi Gorla's chapter encourages collaboration among regional governments, as well as the less feasible goal of reducing the concentration of power in large cities. Charles Leven examines, from a historical perspective and using two different measures, the process of regional deurbanization, concluding that the process intensified in the 1980s. Rainer Mackensen gives a broad sociological and historical perspective to European urban development, particularly Germany's. He predicts larger urban agglomerations in Europe—and a greater number of them.

Three studies comprise Part III, "Implications of Metropolitan Change." Helen Ladd studies the links between the spatial disequilibrium within America's metropolitan areas and the fiscal distress of its cities and concludes that redistributive government assistance is needed to preserve its central cities. Joseph Gyourko and Joseph Tracy analyze the links between urban quality-of-life measures and fiscal policies, incorporating the two measures into one, and conclude that cities must heed both to attract employment. Mark Alan Hughes, in a new concluding chapter to this section, analyzes the implications of metropolitan decentralization in the context of the relative immobility of the center city labor supply, and advocates government assistance to resolve the persistence of "impacted ghettos."

Part IV, "The Role of Government," contains four chapters. Dick Netzer evaluates the appropriateness of the present federalist arrangements in the United States to the problems of its cities. He concludes that giving dollars to people only is inadequate; unconditional federal aid triggered by local conditions is the policy he prefers, along with marginal cost pricing of public infrastructure. Michael Luger's analysis focuses on regional high-technology policy. He argues that government assistance has favored the high-growth areas, thereby increasing regional disparities, and that there should be a supranational mechanism for allocating technology assistance that would reduce disparities. Duncan Maclennan, concentrating on housing policy and using Glasgow as a case study, examines the role of government housing policy and concludes that housing policies directed to enabling markets to function will help central cities. Leo van den Berg argues that cities need to adopt more demand-driven policies—using marketing strategies, emphasizing accessibility, and improving amenities to attract residents.

Two chapters comprise the final section, "Summary and Conclusions." John Quigley closely examines the studies of Linneman, Summers, and Maclennan to analyze commonalities in the structure of urban economic development in the United States and the United Kingdom. He concludes that the authors agree on some diminution in the decentralization trend, and on the relevance of the macroeconomy to the health of urban areas. The final and new chapter, by Paul Cheshire, gathers together the volume's chapters by asking the question: will metropolitan decentralization continue? His conclusion is that it is no longer the necessary "fact" that it was when the first edition was published. In Europe the formation of the European Union and the increased service sector orientation of cities are having positive effects on their urban cores. In the United States, extremely low unemployment rates have helped many large cities, but the essential ingredient of well-deployed federal assistance is not in place.


This chapter is the product of an intensive session among the three volume editors.

Urban Change in the United States and Western Europe: Comparative Analysis and Policy, edited by Anita A. Summers, Paul C. Cheshire and Lanfranco Senn, is available from the Urban Institute Press (paper, ISBN 0-87766-683-0, $39.50). To obtain a copy call (202) 261-5687 or 800.537.5487.

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