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Bright Minds, Big Rent: Gentrification and the Rising Returns to Skill

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  • Edlund, Lena

    (Columbia University)

  • Machado, Cecilia

    (Getulio Vargas Foundation, Brazil)

  • Sviatschi, Maria

    (Columbia University)

Abstract

In 1980, housing prices in the main US cities rose with distance to the city center. By 2010, that relationship had reversed. We propose that this development can be traced to greater labor supply of high-income households through reduced tolerance for commuting. In a tract-level data set covering the 27 largest US cities, years 1980-2010, we employ a city-level Bartik demand shifter for skilled labor and find support for our hypothesis: full-time skilled workers favor proximity to the city center and their increased presence can account for the observed price changes, notably the rising price premium commanded by centrality.

Suggested Citation

  • Edlund, Lena & Machado, Cecilia & Sviatschi, Maria, 2015. "Bright Minds, Big Rent: Gentrification and the Rising Returns to Skill," IZA Discussion Papers 9502, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9502
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    Keywords

    gentrification; returns to skill; time use; location choice;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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