MARKET POWER OF LARGE CITIES AND POLICY DIFFERENCES IN METROPOLITAN-AREAS

When a single city, the 'central city', has a large share of the metropolis population, it will influence housing prices in other, smaller cities, the 'suburbs'. This market power leads to differences in government policy and property values between the central city and suburbs even when residents and amenities in the two regions are identical. When the central city's government is controlled by property-owning residents, its property tax rate exceeds the rate in the suburbs. The central city will also have lower property values than the suburbs.