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Differences in Quality of Life Estimates Using Rents and Home Values

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  • Winters, John V

Abstract

Implicit values of amenities and the quality of life in an area can be measured by differences in “real wages” across areas, where real wages are computed as nominal wages adjusted for the cost of living. Computing cost of living differences involves several important issues, most important being how housing prices should be measured. Previous researchers typically have used some combination of rental payments and homeowner housing values. This paper examines differences in quality of life estimates for U.S. metropolitan areas using, alternatively, rents and housing values. We find that the two measures of quality of life are highly correlated. Value-based estimates, however, are considerably more dispersed than rent-based estimates, likely because of the recent bubble in the housing market and because housing values often provide an imperfect measure of the present user cost of housing. Researchers should be cautious in using housing values to construct quality of life estimates.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22455.

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Date of creation: 15 Apr 2010
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Handle: RePEc:pra:mprapa:22455

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Keywords: quality of life; amenities; rents; housing; wages;

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. On the difficulty of calculating the cost of living
    by Economic Logician in Economic Logic on 2012-08-01 14:32:00
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Cited by:
  1. Winters, John V, 2011. "Human Capital, Higher Education Institutions, and Quality of Life," MPRA Paper 28484, University Library of Munich, Germany.
  2. Wrede, Matthias, 2012. "Wages, rents, unemployment, and the quality of life," IWQW Discussion Paper Series 01/2012 [rev.], Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW).

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