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Urban Productivity at the Household Level

Urban Productivity at the Household Level:

Access to Economic Opportunities and Public Transport Policy In Mexico City Metropolitan Area


David López García

Ph.D. Candidate in Public and Urban Policy, The New School

Adjunct Faculty, Queens College-CUNY


Panel presentation at the 2019 Regional Studies Association (RSA) Latin America Division Conference. Bogotá, Colombia, September 30 - October 1, 2019


Download the slides in this link


SLIDE 2

This presentation is a result of my ongoing doctoral work at The New School. My dissertation looks at the intersection between why people live where they do in cities, the type and spatial location of their economic activity, and the role of the state in bridging people with their economic activity through public transit policy. To do so, I am looking at Mexico City’s Metropolitan Area as a case study, specifically the eastern region comprised of the municipalities of Iztapalapa, Nezahualcóyotl, La Paz, Chimalhuacán, Chicoloapan, and Ixtapaluca.


I went to the field guided by the following questions: What is the meaning of accessibility in Mexico City’s public transit policy? What kinds of accessibility get attention and why? What is the scope of the accessibility provided by public transit infrastructures in my area of study, and what does that mean for peoples’ social mobility perspectives? To find answers, I did 7 months of fieldwork over the Fall of 2018, and over the spring break and summer of 2019. In total, I conducted 64 in-depth interviews with key informants and 4 focus groups with residents from the municipalities under study. I am still in the process of coding the data and educating myself about what to do with it. Nevertheless, the analysis that I have done so far allows me to sketch some preliminary findings. Above all, my fieldwork allowed me to engage in grounded theory that helps me to identify the gaps in the literature of accessibility to which my dissertation can contribute.


This presentation is about two such gaps. I will start by presenting what I call urban productivity at the household level: a contribution to urban productivity theory. I will continue by presenting what I call toll, common, and public mobility resources: a contribution to the mobility resources literature. I will finish by grounding these two contributions in my empirical work to put forward the hypothesis that public transit policy in Mexico City is reinforcing the current patterns of intra-urban inequality by favoring the household productivity of the high-income households, while hampering the household productivity of low-income households.


Before going any further, I cannot stress enough that this is work in progress and any feedback from the audience will be extremely helpful for my dissertation writing process. For that, I thank you in advance.


SLIDE 3

How is urban productivity at the household level different from conventional approaches to urban productivity? Traditionally, the study of urban productivity has been mainly centered in firms. It was Alfred Marshall back in 1920 who concluded that agglomeration of economic activity over space occurs because proximity reduces transport costs for firms, which in turn favors urban productivity. Researchers in the field have since been intrigued by the mechanisms through which firms achieve what we now call agglomeration economies. Nevertheless, the debate has been centered on the role of firms in urban productivity.


This is not to say that households have been absent of the debate. Back in 1974, Vernon Henderson theorized that diseconomies of agglomeration on the side of households might offset the productivity advantage of agglomeration economies on the side of firms (Zouhong & Fan, 2002). But again, the approach of the literature has traditionally been about the role of households in firms’ productivity.


A library search of the phrase “households and urban productivity” yields no coherent results. A library search of the phrase “household productivity” gives results on two kinds of articles. On the one hand, there are articles that study agricultural productivity of rural households with a regional emphasis on Africa and South Asia (Dong et al, 2012; Pattersson & Wikström, 2016; Omondi et al, 2017). On the other hand, there are articles studying the effect of medical treatments in helping households to remain healthy and being able to to participate in labor markets (Strand et al, 2016; van der Heijde et al, 2016).


SLIDE 4

Nevertheless, through my work I am proposing a new use for the concept of ‘household productivity’ by which I mean the efficiency of households in obtaining a share of the wealth that is created in a city. My approach is based on five assumptions.


Assumption 1 is that cities are colossal productive forces that create wealth and economic opportunities. People live in cities to be able to participate in urban-based economic activities in order to access a share of that wealth. This is true since the times of the industrial revolution and its urban epicenter, the post-war era with its industrialization wave, or we can even see it today in examples like the current refugee crisis.


The second assumption is that households can be thought as small firms in which the members of the household participate in different kinds of urban-based economic activities. Some members might be participating in one of the many labor markets that a city has to offer. Some others might be engaging in entrepreneurial activities. In any case, household members engage in an economic activity and, as a result, they obtain an output: the household income.


The third assumption is that, just like firms do, households need to invest to access a share of the city’s wealth. If households want to participate in urban based-economic activities, they have to pay. Whether through a mortgage, rent, or paying their monthly utilities, households spend money on housing. People have to commute to their jobs and offices, so there are transportation costs. People have to pay for lunch near their work places, so there are costs associated with food. And so forth. In sum, in order to obtain a share of the city’s wealth –the household output– households have to invest –the household input–.


Now, the classic definition of productivity goes as follows: “productivity is the effectiveness of productive effort as measured in terms of the rate of output per unit of input”. Drawing on this classic definition of productivity, here is the fourth assumption of my framework: the ratio between what households invest to participate in urban based economic activities and the income they obtain from such participation, is the households’ productivity rate. When seen in this way, not all households have the same rate of household productivity. Some households might have very low cost of living, but their income might be very low and therefore their productivity is low. Other households might have a high cost of living, but their income might be even higher, so their productivity is high. The key to look at household productivity is to look at the relationship between household income and cost of living in a relational way. As a rule of thumb, household productivity increases to the extent that a household’s income grows at a faster rate than their cost of living.


Finally, the fifth assumption is that the state plays a key role in lowering cost of living for households through the provision of infrastructure, so that the household input put into the productive process is minimized in relation to the household output. For example, when the state provides public housing, the cost of housing is reduced. When the state subsidizes public utilities, the cost of water, electricity or gas is reduced. When the state provides subsidized transit infrastructure, the cost of transportation is reduced. When the state provides public health, the cost of health care is reduced. And so forth.


SLIDE 5

Based on these five assumptions, I am proposing the model that you can see in this slide. Household productivity is a function of the ratio between a household’s income and a household’s cost of living. The household’s income is comprised of the sum of incomes of the members of the household. Income can come from a variety of sources like wages, honorariums, profits from entrepreneurial activities, rents from assets or investments, and so on. The household’s cost of living is comprised by the expenditures of housing, transportation, food, financial services, and any other household expenditure.


SLIDE 6

The ratio between household income and cost of living then becomes a measurement of a household’s productivity. A household whose income is equal to its cost of living would have an index of 1. If the household income is greater than the cost of living, the index will be greater than 1. If the cost of living is greater than the household income, the index will be less than one. In this way, we can see that the desired tendency of the index is to increase.


SLIDE 7

Now, what is the relationship between household productivity and public transport policy? In the remainder of this presentation, I will focus on the transportation expenditures as a component of a household cost of living. Let’s think of urban-based economic activities as a resource that cities provide to their inhabitants. But there is a problem: this resource is scattered across urban space, with some areas of the city concentrating the bulk of economic agglomerations while other areas are lack of it. It follows that if people want to have access to certain types of economic activities, they have to commute.


SLIDE 8

As Kowald, Kieser, Mathys and Justen (2017: 1044) have pointed out, one of the prerequisites to be mobile across urban space –and therefore having access to urban-based economic activities– is to have access to mobility resources. Mobility resources have been defined as “any product, service, status, or information that enables or facilitates travel in some way” (Le Vine, Lee-Gosselin, Sivakumar & Polak, 2013: 2). Examples in the literature of mobility resources include a personal car, petrol, parking spaces, motorcycles, bicycles, subscriptions to car-sharing service, public transport tickets, a passport, a membership in a frequent flyer program, a walking stick, one´s own feet, one’s health condition and functional abilities, and even wheelchairs (Le Vine et al, 2013; Kowland et al, 2017; Plevka, Astegiano, Himpe, Tampere & Vandebroek, 2018; Habib, Weiss & Hasmine, 2018; Loder & Axhausen, 2018). The literature on mobility resources has traditionally focused on the determinants behind the ownership of resources to move, with special attention to ownership of a private car (de Jong, 1990; de Jong, Fox, Pieters & Daly, 2004; Nolan, 2010; Le Vine et al, 2013; Kowald et al 2017; Plevka et al, 2018). Scholars have also studied the extent to which public transport accessibility can effectively provide a legitimate substitute for cars (Simma & Axhausen, 2001; Loder & Axhausen, 2018). Only recently, researchers have begun to study the relationship between the availability of mobility resources and peoples’ access to other city resources spread across urban space (Calonge, 2018).


However, scholars in the field have traditionally centered their attention in studying the mobility resources owned by people: that is, the privately-owned mobility resources. While researching this kind of mobility resources is important, the private and public nature of mobility resources has not been prominently addressed by the literature (Loder & Axhausen, 2018). Aiming to narrow this gap in the field, I set up to introduce some nuances to the discussion by resorting to an analytical framework from the field of economics: the classification of goods and services by their level of nonrivalry and nonexclusivity.


SLIDE 9

This framework has proven to be fruitful in the past for bringing new insights in the study of urban infrastructure. In his influential book, Infrastructure: The Social Value of Shared Resources (2012), Brett M. Frischmann from Villanova University resorts to the analysis of infrastructure as an impure public good to advocate for what he calls infrastructure commons management. More recently, in the book Thirsty Cities: Social Contracts and Public Goods Provision in India and China (2019), Selina Ho from the National University of Singapore conceptualized water as a public good to study the relationship between social contracts and the provision of water.


SLIDE 10

As I am sure you know, the framework is based in assessing the nonrivalry and nonexclusivity characteristics of goods and services:


A good is nonrival or indivisible when a unit of the good can be consumed by one individual without detracting, in the slightest, from the consumption opportunities still available to others from that same unit. (…) Another commonly encountered distinguishing characteristic of goods is excludability of benefits. Goods whose benefits can be withheld costlessly by the owner or provider generate excludable benefits. Benefits that are available to all once the good is provided are termed nonexcludable. The in-between points along this spectrum are occupied by impure public goods, whose benefits are partially rival and/or partially excludable. If, therefore, a good does not display both excludability (non-excludabitly) and rivalry (nonrivalry) in their pure forms, the good is called impurely public. (Cornes & Sandler, 1996: 8)


Developed in a collaborative way –first by Samuelson (1954, 1955), then by Buchanan (1965), and finally by Hardin (1968) and Ostrom (1990)–, the framework classifies goods and services into four categories (Table 1).


In one extreme of the spectrum, goods and services that are both rival and excludable are classified as pure private goods. In the other extreme, goods and services for which it is not feasible to exclude consumption (nonexcludability) and can be consumed by everyone without hampering the availability of others to consume it too (nonrivalry) as classified as pure public goods. In between the spectrum there is an array of goods and services which are partially excludable and partially rival. Those that are excludable but can potentially be consumed by everyone without taking away the possibility of others to consume it are classified as toll or club goods. Finally, goods and services that are not excludable but are potentially rival are classified as common pool resources.


SLIDE 11

This analytical framework can be used to unpack mobility resources and classify them into four categories according to their level of nonrivalry and nonexclusivity.


First, private mobility resources are those privately-owned for which people have to pay (excludable) and their use is limited to the person paying (rival). Examples of private mobility resources include a private car, petrol, a private bicycle, or a motorcycle.


Second, public mobility resources are those provided by the state and for which people have free access (nonexcludable) and every person can use them regardless of how other people use them (nonrival). Examples of public mobility resources are the free bus shuttles that substitute subway lines under maintenance, the Staten Island Ferry, the sidewalks, or the streets for cars.


Third, common mobility resources are those that every person can use for free (nonexcludable) but could become scarce and even deplete if many people use them (rival). Examples include a free bicycle sharing system or a free public transit system provided by the city.


Finally, club mobility resources are those that will not become scarce if many people use them (nonrival) but people have to pay in order to access them (excludable). Examples include concession bus systems or car sharing programs.



SLIDE 12

This classification is a useful heuristic tool, but in real life the boundaries to situate a mobility resource within each of these categories are not clear cut. Mobility resources can transition between the toll, common, and public categories to the extent that the state funds their operation and the quantity supplied increases. If a mobility resource is nonrival but the price to access it is high enough that it can effectively exclude portions of the population, then we are talking about a toll mobility resource. However, if the state subsidizes the operation of the mobility resource to the extent that the price is so low that virtually no one can be excluded, but the seats in the system are limited and will not satisfy the demand of ridership, then we are talking about a common mobility resource. If the price continues to be as low so that no one can be effectively excluded but the supply of the mobility resource is increased in a way that the demand is entirely satisfied, then we are talking about a public mobility resource.


SLIDE 13

Now, when look through these theoretical lenses, one can start to see a differentiation across space in the provision of mobility resources. My field work in Mexico City allowed me to observe how some areas of the city are well equipped of common and public mobility resources while others are dramatically underserved. Through these lenses, one can start to see how Mexico City’s public transit policy has favored the provision of common and public mobility resources in the central city while leaving the peripheral areas behind. The central municipalities of the metropolitan area are fully equipped with a subway system that is almost fully subsidized by the state. The fare to ride the subway is 0.26 cents of a dollar, or 4.8 percent of the daily minimum wage. The state-owned bus system RTP that only gives service within the central city is even cheaper –the fare is 0.10 cents of a dollar, or 2 percent of the daily minimum wage.


Nevertheless, the peripheral areas of the city by and large lack common and public mobility resources. People residing in this area are forced to rely in private or toll mobility resources, which directly affects their pocket. In terms of public transit, these areas lack subsidized transit systems like the subway or the RTP buses. Instead, these areas are served by a variety of concessioned bus systems that operate as toll mobility resources. Lacking any kind of subsidy by any governmental agency, buses in these zones charge a relatively high fare. The fare of some bus services connecting the peripheral zones with the city center can reach one dollar. If a person that leaves in the periphery needs to reach the central city, they have to do it through a variety of interconnected systems, and they might end up spending up to 3 dollars, which is 45 percent of the daily minimum wage.


SLIDE 14

This trend is problematic because these allocation of mobility resources across urban space is reinforcing the current patterns of intra-urban inequality through a mechanism of self-selection. On the one hand, the zones of the city that are well-served of common and public mobility resources tend to have high housing costs, which means that only the households that have high incomes in the first place can afford to live there. On the other hand, in the zones that lack common and public mobility resources the cost housing tends to be cheaper, which attracts people with lower incomes and often lower educational levels.


This trend means that the public transit policy in Mexico City is favoring the household productivity of the urbanites that were better-off in the first place, while hampering the household productivity of the worse-off. It follows that the households that were better-off in the first place can increase their urban productivity at a higher rate than the households that were worse-off to begin with.


SLIDE 15

Public discussion about transit policy in Mexico City does include some discussion about the fare, but it is mainly swayed by discussing the time that people spend in their daily commutes, issues of public safety, the quality of the service, and the urban health implications of a poor air quality. Social actors and public authorities are keen to find infrastructural solutions that achieve to reduce time of commutes, increase public safety, advance the quality of the service, or improve air quality. Driven by this urgency, public transit policy is shaped without considering the implications of the public and private nature of infrastructural systems. This, as my presentation conveys, is problematic for urban productivity at the household level.


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