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Have amenities become relatively more important than firm productivity advantages in metropolitan areas?

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  • Richard Deitz
  • Jaison R. Abel

Abstract

We analyze patterns of compensating differentials to determine whether a region's bundle of site characteristics has a greater net effect on household location decisions relative to firm location decisions in U.S. metropolitan areas over time. We estimate skill-adjusted wages and attribute-adjusted rents using hedonic regressions for 238 metropolitan areas in 1990 and 2000. Within the framework of the standard Roback model, we classify each metropolitan area based on whether amenities or firm productivity advantages dominate and analyze the extent to which these classifications change between 1990 and 2000. We then decompose compensating differentials into amenity and firm productivity advantage components and examine how these components change. Empirical results suggest that while the relative importance of amenities appears to have increased slightly between 1990 and 2000, firm productivity advantages continued to dominate amenities in the vast majority of metropolitan areas during this decade.

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Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 344.

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Date of creation: 2008
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Handle: RePEc:fip:fednsr:344

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Keywords: Metropolitan areas - Statistics ; Industrial location ; Households ; Industrial productivity;

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References

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  1. Stuart A. Gabriel & Joe P. Mattey & William L. Wascher, 1996. "Compensating differentials and evolution of the quality-of-life among U.S. states," Working Papers in Applied Economic Theory 96-07, Federal Reserve Bank of San Francisco.
  2. Andrew F. Haughwout, 2000. "Public infrastructure investments, productivity and welfare in fixed geographic areas," Staff Reports 104, Federal Reserve Bank of New York.
  3. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
  4. Edward L. Glaeser & Joshua D. Gottlieb, 2006. "Urban Resurgence and the Consumer City," Harvard Institute of Economic Research Working Papers 2109, Harvard - Institute of Economic Research.
  5. Edward L Glaeser & Jesse M Shapiro, 2003. "Urban Growth in the 1990s: Is City Living Back?," Journal of Regional Science, Wiley Blackwell, vol. 43(1), pages 139-165.
  6. Stuart A. Gabriel & Stuart S. Rosenthal, 2004. "Quality of the Business Environment Versus Quality of Life: Do Firms and Households Like the Same Cities?," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 438-444, February.
  7. Edward L. Glaeser, Jed Kolko, and Albert Saiz, 2001. "Consumer city," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 27-50, January.
  8. Rappaport, Jordan, 2007. "Moving to nice weather," Regional Science and Urban Economics, Elsevier, vol. 37(3), pages 375-398, May.
  9. Richard B. Peiser & Lawrence B. Smith, 1985. "Homeownership Returns, Tenure Choice and Inflation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(4), pages 343-360.
  10. Edward L. Glaeser & Albert Saiz, 2003. "The Rise of the Skilled City," Harvard Institute of Economic Research Working Papers 2025, Harvard - Institute of Economic Research.
  11. Patricia E. Beeson & Randall W. Eberts, 1987. "Identifying amenity and productivity cities using wage and rent differentials," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 16-25.
  12. Beeson, Patricia E & Eberts, Randall W, 1989. "Identifying Productivity and Amenity Effects in Interurban Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 443-52, August.
  13. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
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Cited by:
  1. David Albouy, 2009. "What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values," NBER Working Papers 14981, National Bureau of Economic Research, Inc.

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