Tuesday, March 18, 2008

"Is Accra a Superstar City?"

I am a sucker for an interesting paper title. Today's paper that caught the eye is urban economics related. If Matthew Kahn can post almost exclusively about cities on his "green economics" blog then I am sure I can get away with it.

This is the sort of question that demands an answer (and for a some will involve dusting off the atlas to see where the Accra is). Don't be afraid to admit it.

The first thing that comes to mind is where did the data come from and what is the quality. This remains a concern. Also taking a US based methodology to an African city is problematic.

Unfortunately the abstract does not live up to the title. Where is the mention of celebrities and rock stars?


Is Accra a Superstar City?

World Bank
World Bank - Policy Research Department December 1, 2007

World Bank Policy Research Working Paper No. 4453

A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid residents. We consider the case of Accra, Ghana, in this light, estimating the elasticity of housing supply and discussing the implications for growth and income distribution. There is not a great deal of data available to examine trends in Accra, so our method is indirect. First, we use a variant of the traditional monocentric city model to calculate the elasticity of Accra's housing supply relative to those of other similarly-sized African cities. This suggests that housing supply responsiveness is much higher elsewhere. This muted supply responsiveness is consistent with the observed higher housing prices. Second, we estimate a number of traditional housing demand equations and reduced form equations. Placing a number of restrictions on the equations allows us to infer Accra's housing supply elasticity. Taken together, our approaches suggest that lower-income families in Accra have such poor housing conditions because the market is extremely unresponsive to demand. Although the outcomes we have traced - high housing prices and low quality - are not unusual relative to the other developed country superstar cities, they are extreme. The welfare costs are considerable, so much so that in addition to direct housing market effects, these policies also appear to have potentially significant implications for the achievement of more equitable growth.

Keywords: Economic Theory & Research, Housing & Human Habitats, Banks & Banking Reform, Public Sector Management and Reform

Working Paper Series

Suggested Citation

Buckley, Robert M. M. and Mathema, Ashna S., "Is Accra a Superstar City?" (December 1, 2007). World Bank Policy Research Working Paper No. 4453