Why Do The Poor Live In Cities? The Role of Public Transportation

More than 19 percent of people in American central cities are poor. In suburbs, just 7.5 percent of people live in poverty. The income elasticity of demand for land is too low for urban poverty to come from wealthy individuals’ wanting to live where land is cheap (the traditional explanation of urban poverty). A significant income elasticity for land exists only because the rich eschew apartment living, and that elasticity is still too low to explain the poor’s urbanization. The urbanization of poverty comes mainly from better access to public transportation in central cities. * Justin Funches, Joseph Geraci, Albert Saiz and Monica Lamb were superb research assistants. Financial assistance was provided by the National Science Foundation and the Sloan Foundation. Seminar participants at Harvard and Michigan and Jan Brueckner, David Cutler, Steve Malpezzi, Andrei Shleifer and Bill Wheaton gave us helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of Kansas City or the Federal Reserve System.