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What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values

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  • David Albouy

Abstract

An equilibrium model predicts that inter-city differences in firm productivity, and the full value of local amenities cannot be inferred without land values. These may be inferred from ordinary wage and housing-cost data using the housing-cost function if housing-sector productivity is constant. A calibrated model predicts how quality-of-life and production amenities are capitalized differently into land values, wages, housing costs, and federal-tax payments. The total value of these amenities are estimated across U.S. cities. Wages and housing costs are driven more by productivity than quality-of-life differences. The most productive and valuable cities are typically coastal, sunny, mild, educated and large.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14981.

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Date of creation: May 2009
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Handle: RePEc:nbr:nberwo:14981

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