City re-location and potential wealth loss - A method of measurement and an empirical test

While physical city re-location is relatively uncommon, the economic center of a city might shift over time, sometimes over a short period of time. Commonly this happens when large retail centers are constructed in proximity to the city. It can also be the case that cities subject to frequent natural disasters choose to re-locate to “safer” areas. Regardless of the reason, this paper argues that the property market will see both winners and losers in terms of changes in distance to the city center. The aim of this paper is to develop a measure allowing for quantification of the gains and losses of such a re-location, these will help determine if the re-location is Kaldor-Hicks efficient. Further, the usefulness of this measure will be illustrated using Kiruna as an example. Kiruna is threatened by ground movements due to the mining industry and a decision has been made to re-locate. The empirical results suggest that for the particular case of Kiruna, the re-location will result in aggregate gains larger than aggregate losses.