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Location-Specific Human Capital, Location Choice and Amenity Demand

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  • Krupka, Douglas J.

    (University of Michigan)

Abstract

The role of amenities in the flow of migrants has been debated for some years. This paper advances an original model of amenities that work through household production instead of directly through the utility function. Area characteristics (amenities) affect household production, causing certain kinds of human capital investments to be rewarded more than others. Area heterogeneity makes such investments location-specific, in that some areas’ characteristics will reward certain kinds of knowledge more than others. This specificity – along with a period of exogenous location (before migration can be carried out) – increases the opportunity costs of moving, diminishes migration flows between dissimilar locations and increases valuation of amenities which were present in the originating area. These theoretical results emphasize people’s sorting across areas and thus differ from the results of the standard model of compensating differentials. Empirical tests of the model’s predictions using NLSY79 data show that childhood investments affect migration flows in the way proposed by the model.

Suggested Citation

  • Krupka, Douglas J., 2007. "Location-Specific Human Capital, Location Choice and Amenity Demand," IZA Discussion Papers 2987, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp2987
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    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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