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Income Sorting Across Space: The Role of Amenities and Commuting Costs

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  • Carl Gaigne
  • Hans R.A. Koster
  • Fabien Moizeau
  • Jacques-François Thisse

Abstract

We study the sorting of skill/income-heterogeneous consumers within and between cities. We allow for non-homothetic preferences and locations that are differentiated by their accessibility to exogenous amenities and distance to employment centers, where production is subject to local externalities. The residential equilibrium is driven by the properties of an amenity-commuting aggregator obtained from the primitives of the model. Using the model’s structure and estimated parameters based on micro-data for the Netherlands, we predict that exogenous amenities are a key driver of spatial sorting. Our general equilibrium counterfactual analysis shows that in the absence of amenities, the GDP increases by 10% because commutes are shorter. However, income segregation rises and 95% of consumers are worse-off.

Suggested Citation

  • Carl Gaigne & Hans R.A. Koster & Fabien Moizeau & Jacques-François Thisse, 2020. "Income Sorting Across Space: The Role of Amenities and Commuting Costs," Working Papers SMART 20-06, INRAE UMR SMART.
    • Handle: RePEc:rae:wpaper:202006
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    Cited by:

    1. Gaigné, Carl & Koster, Hans R.A. & Moizeau, Fabien & Thisse, Jacques-François, 2022. "Who lives where in the city? Amenities, commuting and income sorting," Journal of Urban Economics, Elsevier, vol. 128(C).

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    More about this item

    Keywords

    cities; social stratification; income; amenities; commuting;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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