The Persistence of Urban Decline: Evidence from France's Largest Coal Basin

Abstract

Urban decline and urban growth are not two sides of the same coin. When local positive shocks occur it typically leads to an expansion of the building stock, but when negative shocks hit, the existing building stock persists. In this paper, we set up a spatial equilibrium model to disentangle the impact of spillovers and housing quality in determining the persistence of urban decline. We use the history of coal production in France's largest mining basin as a source of exogenous variation in negative economic shocks. The geological delimitation of the basin and the placement of large-scale housing developments in close proximity to mines provide us with the opportunity to exploit very local spatial variation to identify the causal determinants of urban decline. We show that housing prices today drop by 11.2% when entering the mining basin. About 40% of this gap can be attributed to consistently lower housing quality, with the remaining portion being ascribed to spillover effects. The paper is co-authored with Gabriel Loumeau