DELINEATING METROPOLITAN AREAS USING LAND PRICES*

This paper proposes an approach to delineating metropolitan areas that is more general than the standard approaches in three respects: First, it uses the fraction of land prices attributable to economies of urban agglomeration instead of using com- muting intensities as an indicator of economic integration between metropolitan centers and their hinterlands. Second, it identifies metropolitan centers endogenously instead of determining them exogenously. And third, it takes metropolitan subcenters explicitly into account. An empirical illustration is used to show that the approach tends to de- lineate fewer but larger metropolitan areas in densely populated regions, and smaller metropolitan areas in sparsely populated regions. 1. MOTIVATION Metropolitan areas play an important role as subjects of regional eco- nomic policy, urban planning, and economic analysis in various countries. The metropolitan statistical areas (MSA) in the U.S. or the functional urban regions (FUR) in Western Europe are prominent examples. Metropolitan areas are usu- ally defined as sets of consecutive local administrative areas that comprise at least one larger core city and the adjacent administrative areas that have a high degree of social and economic integration with that core city (e.g., USCB, 2006). In virtually all delineations of metropolitan areas, the commuting inten- sity between a local administrative area and a core city is used as the indicator for the degree of economic integration. The U.S. MSAs, for example, comprise at least one core city with a population of 50,000 or more as well as any adjacent counties from where at least 25 percent of the employed residents commute to the core city's county (OMB, 2000). Similarly, the Western European FURs com- prise at least one core "urbanized area" with 20,000 or more jobs as well as any adjacent NUTS3 regions from where more workers commute to that core than to any other core (Cheshire and Hay, 1989). See Karlsson and Olsson (2006) for a recent survey of the various commuting-based delineation concepts.