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

  • David Albouy

This article examines and quantifies the relationship between local amenities and prices in an equilibrium model, demonstrating the role of non-traded goods and federal taxes. I derive formulae using factor shares to infer local land rents, productivity, and the total value of amenities from wage and housing-cost data, applying them to U.S. metropolitan areas. The formulae address how “wage multipliers,” heterogeneity in non-traded firm productivity, and tax-driven amenity value expropriation affect price capitalization. Wage and housing-cost variations across metros 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
Note: EEE PE
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