+ good eats, durham a case study in urban agglomeration carmen augustine april 2013
TRANSCRIPT
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Good Eats, Durham
A Case Study in Urban AgglomerationCarmen AugustineApril 2013
+Introduction
Durham has changed a lot in the 4 years I have been at Duke
Most of the changes have been restaurant, bar, specialty food store openings
Why is Durham growing, and why is its economic growth concentrated in the food industry?
+Restaurant Openings in Downtown Durham
Sep
Jan
May
Oct
Feb Jul
Toast Feb-08Revolution Dec-08Cuban Revolution Jul-09Dos Perros Aug-09Beyu Caffé Jan-10Tobacco Road Sports Café Apr-10Dame's Chicken and Waffles Aug-10Scratch Aug-10Bull City Burger and Brewery Mar-11Geer Street Garden May-11Loaf Nov-11Mateo Aug-12Pizzeria Toro Oct-12
Loaf
Scratch
Dos Perros
BCBBRevolution
Tobacco Road Sports Cafe
Cuban Revoultion
Pizzeria ToroMateo
Beyu CaffeToast
Dame’s
+Urban Agglomeration
Urban agglomeration is the phenomenon that once a critical mass of businesses cluster in one urban area, the volume of activity alone is enough to attract other businesses
The most important implication of this model is that cities can form anywhere
Business activity, rather than natural resources or location, determines where new cities will form
Core-periphery model: agglomeration of manufacturing will occur at an urban hub, while agricultural producers will continue to exist at the periphery Consumers choose to locate based on wage rate, land rental rate and
availability of goods The periphery must continue to exist even as the core expands
+Krugman—1991
“Circular causation”—once a city is established, the benefits of agglomeration draw in more businesses and consumers
In order to minimize transportation costs, manufacturers cluster together—this becomes more important as production is broken into sub-industries; this is called the “price index effect”
An accumulation of businesses draws in more skilled labor, increasing the quality of labor and expanding the customer base; this is called the “home market effect”
Firms near each other share knowledge and technology
Drawback: prices are inflated
As long as transportation costs are low, the beneficial price index and home market effects outweigh the cost of competition and a city will form somewhere in a rural landscape
+Krugman—1993
In a later paper, Krugman re-coins the concept of circular causation into “first nature” and “second nature”
Look at Chicago—there is not a wealth of natural resources available there
Minimization of transportation costs is the “first nature” that determines all possible locations where a city could form
The “second nature” of a city is the accumulation of businesses that attract more business—the city becomes a destination in and of itself
+Fujita
In a discussion similar to Krugman, he mentions the “snowball effect” of economic activity clustered in an urban center
Some of the benefits of agglomeration include: Transfer of knowledge Technology Low transportation cost Variety of products Density of laborers and consumers
Along with nontraded goods—cities attract a variety of businesses such as restaurants, law firms and barbershops that cannot be exported from the city, an additional benefit
Fujita more than others stresses the human benefit of agglomeration: people have a natural propensity to live around and interact with others, creating an intellectual and creative network “Face-to-face communication is most effective for rapid product development”
Information as a public good
+Hanson
The accumulation of business drives wage rate up, attracting laborers
Market access is a stronger draw than natural resources available in the city
+Transformation of the Monocentric System
The previous models hypothesized formation of a single city in a rural area
How do you explain locations of cities in three-dimensional space, and why some are closer than others?
Bifurcation is the division of urban activity between more than one geographic area
There are several theories by which bifurcation could occur in a city
+Fujita
Agglomeration is caused by circular causation (centripetal force, “second nature”, etc.), but frontier cities occasionally emerge at the periphery
There is some critical population Ñ at which competition between neighboring firms is so high that it is beneficial for firms to relocate to the periphery to reduce cost of importing agricultural goods
These periphery firms benefit from proximity to the rural market and low land/wage rates
At some distance x* the benefit of relocation is maximized, such that one can predict the bifurcation of an established center
For any N > Ñ, a city will bifurcate into one urban center with two peripheral cities at distances x* and –x* from the center
Bifurcation continues to occur as cities reach saturation
Population Size and Capacity Model Specifications
(Fujita 1997, 413)
+Partridge
New economic geography model: agglomeration shadows from an urban center limit the amount of economic activity that occurs in the surrounding region
Partridge hypothesizes that the centripetal forces of an urban center outweigh access to rural markets and lower cost at the periphery, pulling business into the city
Thus, it is beneficial for small cities to locate within the shadow of larger ones
Partridge tests a model relating growth rate of city to distance to high-tier urban centers, and finds that growth is higher with proximity to the center
NEG—An Alternative Model Proximity of Urban Centers
(Partridge, 452)
+Conclusions from Previous Literature
Urban agglomeration acts as a centripetal force, drawing in other business because of: Variety of other goods available Variety and availability of nontraded goods Quality of labor force Size of consumer base Knowledge sharing and technology
At a certain point, a city reaches saturation and bifurcates (Fujita)
Small (“low-tier”) urban centers benefit from being located proximally to large cities (Partridge)
+Dos Perros
Opened August 2009 at Mangum and E Parrish At the time, this was far removed from other restaurants in
the downtown area (Toast, Revolution, American Tobacco complex)
Owner Charlie Deal
Mexican fine dining
Over the past 4 years of operations, how have restaurant openings in the downtown area affected business?
+Dos Perros Total Sales, 2010-2012
2009.5 2010 2010.5 2011 2011.5 2012 2012.5$0.00
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
$1,400,000.00
$1,600,000.00
Sales
+What about Bull City Burger?
The proximity of BCBB has actually helped Dos Perros draw more customers to the area west of Mangum St., Charlie tells me
When the wait is long at Dos Perros, customers can opt to eat at BCBB and come back another night
Bars (Alley 26) and bakeries (Loaf, Scratch) are even more complementary—restaurant patrons can have a drink at Alley 26 while they wait for a table
Charlie’s other restaurant, Jujube, is located in a strip mall in Chapel Hill—there is no spillover of consumers like there is in Durham, because if a table is not available guests will have to leave and come back, or just come back another night
+Dos Perros Saturday Night Average Seatings
2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.50
50
100
150
200
250
FebruaryMarchJuneSeptemberDecember
+Dos Perros Holiday Seatings
2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.50
50
100
150
200
250
300
Valentine's DayCinco de MayoNew Year's Eve
+Restaurateurs on Durham
“We’re sort of the envy of Chapel Hill and Raleigh.” – Charlie Deal Durham has a buzz that attracts customers Any new opening will draw in customers, even to restaurants that
have been open for years Downtown Durham has become a destination in itself
Matt Kelly, owner of Vin Rouge and Mateo, noticed a similar trend Having a diverse selection of quality restaurants drives business Chef’s reputation, location, skill are still important Durham has been attracting skilled and creative chefs—the success is
not simply due to concentration When Blu opened next door to Vin Rouge, he noticed no lag in
business DPAC creates another reason for Durham residents to come downtown
for dinner
+Conclusions
There are several possible explanations for Durham’s existence and success:
Concentration of business activity has drawn in other restaurants and food shops (evidence: Dos Perros)
The DPAC has created a reason for Durham residents to travel downtown
The proximity of Durham to Raleigh gives Durham residents access to the resources of a larger city with lower land rental cost
Even if there is an absence of natural resources, Durham has created a centripetal force that draws in new business
+Implications and Further Study
Does the success in Durham necessarily imply that Raleigh has reached saturation?
At what point will Durham reach saturation?
Questions for further study: What effect did the DPAC have on restaurant openings and
business How did the hub of activity at Geer St. and Rigsbee Ave.
originate, and how has business changed over the past 1-2 years
Policy implications: How will toll roads impact the development of Raleigh and
Durham, both individually and as a core-periphery set?
+References
Fujita, M. and T. Mori, 1997, “Structural Stability and Evolution of Urban System,” Regional Science and Urban Economics, 27, 399-442
Fujita, M. and J. F. Thisse, 1996, “Economics of Agglomeration,” Journal of the Japanese and International Economies, 10(4): 339-378
Hanson, Gordon H., 2005, “Market Potential, Increasing Returns, and Geographic Concentration,” Journal of International Economics, 67, 1-24
Krugman, P., 1991, “Increasing Returns and Economic Geography,” Journal of Political Economy, 99, 483-499
Krugman, P., 1993, “First Nature, Second Nature, and Metropolitan Location,” Journal of Regional Science, 33, 129-144
Partridge, M. D., D. S. Rickman, K. Ali and M. R. Olfert, 2009, “Do New Economic Geography Agglomeration Shadows Underlie Current Population Dynamics Across the Urban Hierarchy?” Regional Science, 88, 445-466
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Questions?