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Wages, Rents, And Heterogeneous Moving Costs

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  • DOUGLAS J. KRUPKA
  • KWAME N. DONALDSON

Abstract

The model of compensating differentials in regional labor markets was developed by Roback (1982). The model interprets regional differences in constant quality wages and rents as compensating firms and residents for inter-regional differences in amenities. The model assumes that the costs of relocating to a new city are zero. The results hold in the presence of moving costs for the marginal migrant. This paper extends the Roback model to allow for moving costs which vary among a city’s residents and businesses. This modification of the model generates new interpretations of regional differences in rents and (to a lesser extent) wages. The importance of amenities is retained, but housing supply becomes the main other determinant of regional rents. Housing supply was for the most part ignored in the literature following on Roback’s initial insight. The new perspective also provides a bridge between the neo-classical perspective implicit in Roback’s approach and the newer literature on agglomeration economies.
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  • Douglas J. Krupka & Kwame N. Donaldson, 2013. "Wages, Rents, And Heterogeneous Moving Costs," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 844-864, January.
  • Handle: RePEc:bla:ecinqu:v:51:y:2013:i:1:p:844-864
    DOI: j.1465-7295.2012.00475.x
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    4. Dan S. Rickman & Hongbo Wang, 2015. "Regional Housing Supply Elasticity in Spatial Equilibrium Growth Analysis," Economics Working Paper Series 1509, Oklahoma State University, Department of Economics and Legal Studies in Business.
    5. Douglas J. Krupka, 2009. "Location‐Specific Human Capital, Location Choice And Amenity Demand," Journal of Regional Science, Wiley Blackwell, vol. 49(5), pages 833-854, December.
    6. Teruel Carrizosa , Mercedes & Segarra Blasco , Agustí, 2009. "Immigration and Firm Performance: a city-level approach," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 15, pages 111-137.
    7. John V Winters & Yu Li, 2017. "Urbanisation, natural amenities and subjective well-being: Evidence from US counties," Urban Studies, Urban Studies Journal Limited, vol. 54(8), pages 1956-1973, June.
    8. Belchior, Carlos Alberto & Gonzaga, Gustavo & Ulyssea, Gabriel, 2023. "Unpacking Neighborhood Effects: Experimental Evidence from a Large-Scale Housing Program in Brazil," IZA Discussion Papers 16113, Institute of Labor Economics (IZA).
    9. Kopmann, Angela & Rehdanz, Katrin, 2014. "Underestimated Benefits from Periphery: Internal Migration and Subjective Well-being," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100382, Verein für Socialpolitik / German Economic Association.
    10. Andrew J. Oswald & Stephen Wu, 2011. "Well-Being across America," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1118-1134, November.
    11. Enrico Moretti, 2013. "Real Wage Inequality," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 65-103, January.
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    13. Tianzheng Zhang & Yingxiang Zeng & Yingjie Zhang & Yan Song & Hongxun Li, 2020. "Dynamic and Heterogeneous Demand for Urban Green Space by Urban Residents: Evidence from the Cities in China," Sustainability, MDPI, vol. 12(22), pages 1-15, November.
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    15. Hilber, Christian A. L., 2011. "The economics implications of house price capitalization a survey of an emerging literature," LSE Research Online Documents on Economics 58596, London School of Economics and Political Science, LSE Library.
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    More about this item

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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