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Urban Population and Amenities: The Neoclassical Model of Location

  • David Albouy
  • Bryan Stuart

We use a neoclassical general-equilibrium model to explain cross-metro variation in population, density, and land supply based on three amenity types: quality-of-life, productivity in tradables, and productivity in non-tradables. This elucidates commonly-estimated elasticities of local labor and housing supply and demand. From wage and housing-cost indices, the model explains half of observed density and total population variation, and finds jobs follow people more than people follow jobs. Land-area and density data are used to estimate elasticities of housing and land supply, and improve land-rent and local-productivity estimates. We show how relaxing land-use regulations and neutralizing federal taxes would affect different cities.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19919.

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Date of creation: Feb 2014
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Handle: RePEc:nbr:nberwo:19919
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  1. Jesse M. Shapiro, 2006. "Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 324-335, May.
  2. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," NBER Working Papers 3993, National Bureau of Economic Research, Inc.
  3. Matias Busso & Jesse Gregory & Patrick M. Kline, 2010. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," NBER Working Papers 16096, National Bureau of Economic Research, Inc.
  4. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
  5. McDonald, John F., 1981. "Capital-land substitution in urban housing: A survey of empirical estimates," Journal of Urban Economics, Elsevier, vol. 9(2), pages 190-211, March.
  6. Edward L. Glaeser & Joseph Gyourko, . "Urban Decline and Durable Housing," Zell/Lurie Center Working Papers 382, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
  7. Gerke Hoogstra & Jouke Van Dijk & Raymond J.G.M. Florax, 2005. "Do jobs follow people or people follow jobs? A meta-analysis of Carlino-Mills studies," ERSA conference papers ersa05p737, European Regional Science Association.
  8. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  9. Sturm, Daniel & Ahlfeldt, Gabriel & Redding, Stephen & Wolf, Nikolaus, 2013. "The Economics of Density: Evidence from the Berlin Wall," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79873, Verein für Socialpolitik / German Economic Association.
  10. David Albouy, 2008. "Are Big Cities Bad Places to Live? Estimating Quality of Life across Metropolitan Areas," NBER Working Papers 14472, National Bureau of Economic Research, Inc.
  11. David Albouy, 2009. "What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values," NBER Working Papers 14981, National Bureau of Economic Research, Inc.
  12. Edward L. Glaeser & Joseph Gyourko & Raven E. Saks, 2006. "Urban growth and housing supply," Journal of Economic Geography, Oxford University Press, vol. 6(1), pages 71-89, January.
  13. Che‐Lin Su & Kenneth L. Judd, 2012. "Constrained Optimization Approaches to Estimation of Structural Models," Econometrica, Econometric Society, vol. 80(5), pages 2213-2230, 09.
  14. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2012. "The Costs of Agglomeration: Land Prices in French Cities," CEPR Discussion Papers 9240, C.E.P.R. Discussion Papers.
  15. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2012. "The Cost of Agglomeration: Land Prices in Cities," Sciences Po publications 9240, Sciences Po.
  16. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-91, October.
  17. Sanghoon Lee & Qiang Li, 2010. "Uneven landscapes and the city size distribution," Working Papers 2010/41, Institut d'Economia de Barcelona (IEB).
  18. David Albouy & Gabriel Ehrlich, 2012. "Metropolitan Land Values and Housing Productivity," NBER Working Papers 18110, National Bureau of Economic Research, Inc.
  19. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, Oxford University Press, vol. 125(3), pages 1253-1296.
  20. Kenneth Y. Chay & Michael Greenstone, 2005. "Does Air Quality Matter? Evidence from the Housing Market," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 376-424, April.
  21. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  22. Saks, Raven E., 2008. "Job creation and housing construction: Constraints on metropolitan area employment growth," Journal of Urban Economics, Elsevier, vol. 64(1), pages 178-195, July.
  23. Thorsnes, Paul, 1997. "Consistent Estimates of the Elasticity of Substitution between Land and Non-Land Inputs in the Production of Housing," Journal of Urban Economics, Elsevier, vol. 42(1), pages 98-108, July.
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