COMPENSATION FOR COMMUTES IN THE LAND AND LABOR MARKETS: SOME EVIDENCE FROM THE TOKYO METROPOLITAN AREA*

ABSTRACT. Recent research suggests that in nonmonocentric cities compensation for commutes takes the form of both lower housing prices and higher wages. This paper develops a random utility model that predicts the probability of an actor choosing to commute between each residence and job in a metropolitan area conditional on the observed location of housing units and job sites. The model allows commuting time, origin-specific amenities, land prices, destination-specific amenities and wages to influence actors' choices. We estimate the model using maximum likelihood and generalized least squares techniques and data on commuting between each of 38 origin and 15 destination jurisdictions in the Tokyo metropolitan area. The empirical results show that, all else equal, a one percent increase in commuting time reduces the probability that a route (origin-destination combination) will be chosen by almost five percent. Origin-specific amenities are not completely capitalized into land prices and destination-specific amenities are not completely capitalized into wages. Desirable residential amenities include school quality and a low ratio of day to night population. Desirable workplace amenities include a large share of white collar jobs and a high density of employment.     

SPATIAL HEDONIC MODELS OF AIRPORT NOISE,PROXIMITY, AND HOUSING PRICES*

ABSTRACT Despite the refrain that housing prices are determined by “location, location, and location,” few studies of airport noise and housing prices have incorporated spatial econometric techniques. We compare various spatial econometric models and estimation methods in a hedonic price framework to examine the impact of noise on 2003 housing prices near the Atlanta airport. Spatial effects are best captured by a model including both spatial autocorrelation and autoregressive parameters estimated by a generalized moments approach. In our preferred model, houses located in an area in which noise disrupts normal activities (defined by a day–night sound level of 70–75 decibels) sell for 20.8 percent less than houses located where noise does not disrupt normal activities (defined by a day–night sound level below 65 decibels). The inclusion of spatial effects magnifies the negative price impacts of airport noise. Finally, after controlling for noise, houses farther from the airport sell for less; the price elasticity with respect to distance is −0.15, implying that airport proximity is an amenity.     

AMENITIES VERSUS LABOR MARKET OPPORTUNITIES: CHOOSING THE OPTIMAL DISTANCE TO MOVE*

ABSTRACT. A recent debate in the regional economics literature has focused attention on the motivation behind an individual's decision to migrate. Human-capital migration models emphasize labor market disequilibria whereas alternative (hedonic) migration models stress households’altered demand for nontraded goods. In this paper, we test the relative importance of these two possible motivations for moving between metropolitan areas. We use an intercity hedonic model to decompose wages into equilibrium and disequilibrium components. We then compare the separate influences of amenities and the disequilibrium component of wages on the distance moved between two metropolitan areas. Our findings indicate that both economic factors and amenity differentials are significant factors in explaining regional migration.     

SOMETIMES CLOSE IS GOOD ENOUGH: THE VALUE OF NEARBY ENVIRONMENTAL AMENITIES*

ABSTRACT An extensive empirical literature exists, showing that variations in region‐specific amenities can account for persistent differences in real wages across regions. However, this literature has considered only amenities in the same location as the household. This paper argues that environmental amenities at some distance from but accessible to urban areas may lead to negative compensating wage differentials. We use a general equilibrium framework and data from the 1995 Current Population Survey to calculate implicit amenity prices based on measures of distance to environmental amenities. Our results suggest that amenities outside the metropolitan area do generate compensating wage differentials, as workers are willing to accept lower wages to live in accessible proximity to “nice” places. This implies that these places provide a positive externality to those communities that find them accessible. The estimated effects are quantitatively important, suggesting that these externalities should be taken into account in policy making.     

A revealed preference index of urban amenities: Using travel demand as a proxy

We introduce an index of urban amenities based on hotel night stays that can rank most US metros for the years 1990 through 2015. This naive index can be used on its own to study changes in amenity level or with other measures to reduce omitted variable bias. Researchers can also use the index to create panel datasets from more sophisticated cross‐sectional indexes. Empirical testing shows the bundle of amenities associated with hotel stays has substantial effects on variation in housing prices across cities and time, validating our proxy variable approach. Testing for an association with wages is inconclusive.     

Location choice,life cycle and amenities

Our study proposes a housing location choice model where a household faces a trade‐off between proximity to place of employment and proximity to amenities. We consider subsamples of high amenity cities and low amenity cities and households with and without children. We show that the roles of gender, education, homeownership, household composition, and public transportation vary significantly depending on level of amenities. Households with a female head of household, those with a working spouse and with older children prefer locating closer to downtown amenities. Female workers with and without children locate closer to work, in high and low amenity cities.     

ECONOMIC IMPACTS OF CULTURAL DIVERSITY IN THE NETHERLANDS: PRODUCTIVITY,UTILITY, AND SORTING*

ABSTRACT This paper identifies the impact of cultural diversity on local economies, by explaining spatial disparities in wages and housing prices across Dutch cities using unique individual panel data of homeowners during the period 1999 and 2008. We distinguish between the effects of spatial sorting based on individual heterogeneity, interactions‐based productivity effects, and consumer amenities while controlling for interactions between the labor and housing market. In line with previous literature, we find a positive effect of cultural diversity on average housing prices. After controlling for spatial sorting, the effect of cultural diversity on housing prices is negative. The negative impact of cultural diversity on local housing markets is likely driven by a causal effect between the presence of immigrants and neighborhood quality that outweighs a positive effect of immigrant‐induced diversity in consumption goods.     

On the role of amenities in models of migration and regional development

"The role of location-specific amenities in human migration decisions, and subsequently regional development, is explored. A framework is developed which motivates a new assessment of existing alternative models of regional development, indicating the need for additional modeling efforts which focus upon amenities as critical elements in such analyses. The approach hinges upon the notion that amenity values are capitalized into wages, rents, or other local prices. This process of capitalization enables researchers to explore the implicit value that society places upon amenities, which can then be used in assessing future regional-development trends in a more comprehensive manner."     

IF YOU CANNOT TAKE THE HEAT,GET OUT OF THE CERRADO … RECOVERING THE EQUILIBRIUM AMENITY COST OF NONMARGINAL CLIMATE CHANGE IN BRAZIL*

ABSTRACT This paper presents an empirical technique for valuing large changes in nonmarketed local attributes (e.g., climate amenities) without data describing prices of locally traded commodities like housing. A model of endogenous sorting is used to identify individuals' indirect utility functions, from which the value of the change in the local attribute is recovered while accounting for equilibrium impacts on markets for labor and locally traded commodities. Annual amenity costs of Brazilian climate change are estimated to be between $1.6 and $8.1 billion for a moderate climate change scenario, depending upon the role of migration costs.     

WAGES,RENTS, UNEMPLOYMENT,AND THE QUALITY OF LIFE: A CONSISTENT THEORY‐BASED MEASURE

Combining a spatial equilibrium model with a search‐matching unemployment model, this paper analyzes the willingness to pay for regional amenities and the regional quality of life when wages, rents, and unemployment risk compensate for local amenities and disamenities. The results are compared with those obtained from the Rosen‐Roback approach. We demonstrate that the traditional approach gives too much weight to the wage differential if search frictions are significant. Furthermore, the paper confirms that the wage curve is negatively sloped for quasi‐linear utility. Specifically, the wage rate increases and the unemployment rate decreases in response to an increase in the amenity level if the amenity is marginally more beneficial to producers than to consumers.     

POPULATION GROWTH IN HIGH‐AMENITY NONMETROPOLITAN AREAS: WHAT'S THE PROGNOSIS?*

ABSTRACT This paper examines the continued strong population growth in U.S. nonmetropolitan areas possessing high levels of natural amenities during the 1990s and the reasons for near convergence of growth across the top tiers of the amenity hierarchy. Based on estimated parsimonious spatial hedonic growth regressions, strong demand for high‐amenity areas continued in the 1990s, but the converging of population growth across the top tiers appeared related to capitalization of amenity differences among the tiers into factor prices. Yet, evidence obtained from controlling for spatial effects suggests that the relative quality of life in the top two tiers had deteriorated.     

Housing Price Gradients: The Intersection of Space and Built Form

A hedonic housing price model, implemented for the Dallas region, reveals a housing market structured around multiple nodes, some of which give rise to positive and others to negative externalities. The utility/disutility derived from relative location is capitalized into the size and quality of the housing stock and the nature of neighborhood amenities. The result is a convergence of space and built form.     

DRS. MUTH AND MILLS MEET DR. TIEBOUT: INTEGRATING LOCATION‐SPECIFIC AMENITIES INTO MULTI‐COMMUNITY EQUILIBRIUM MODELS*

ABSTRACT We consider the problem of integrating spatial amenities into locational equilibrium models with multiple jurisdictions. We provide sufficient conditions under which models that assume a single housing price in each community continue to apply in the presence of location‐specific amenities that vary both within and across communities. If these conditions are satisfied, the models, estimation methods, and results in Epple and Sieg (1999) are valid in the presence of (potentially unobserved) location‐specific amenities. We also show how to construct sufficient statistics that capture location specific spatial heterogeneity. We apply these techniques using data from the Pittsburgh metropolitan area. We find that these amenity measures capture proximity to important local employment centers as well as heterogeneity in school quality within a given school district.     

The role of equilibrium and disequilibrium in modeling regional growth and decline: a critical reassessment

ABSTRACT. The assumption of interregional equilibrium in migration research has recently been attacked. At issue is the motivation for on-going migration if rents and wags accurately compensate for spatial amenity variations; but if rents and wages fail to accurately compensate potential migrants, then amenity valuations must be flawed. We here show that arguments supporting substantial disequilibrium in the US. economy are unconvincing. The substantive issues are then clarified by a model which allows for both equilibrium and disequilibrium migration. We conclude that intertemporally systematic migration stems predominantly from equilibrium forces.     

VALUING AMENITIES AND DISAMENITIES OF URBAN SCALE: CAN BIGGER BE BETTER?*

ABSTRACT. Considerable effort has been devoted within the recent literature to the valuation of urban amenities and disamenities, as well as to econometric procedures required for the estimation of their implicit market “prices.” This study questions the equilibrium conditions invoked within this literature to derive estimates of marginal willingness to pay, conditions premised upon “perfect” labor mobility among cities. It is shown that such assumptions need not be invoked if one considers the amenity price-mobility relationship directly. This is accomplished by appending a binary migration model to a first-stage wage equation, a procrdure that provides estimates of willingness to pay that can diverge from market-determined implicit prices. Comparison of such values yields important information on the adequacy of market compensation for disamenities (amenities) throughout metropolitan areas.     

Time,hedonic migration,and household production

"A hedonic migration model is developed where regional amenities are viewed as influencing household production within the framework of the new demand theory. The inputs to household production are goods, time and housing. It is shown that economic growth in the economy as a whole will increase the relative attractiveness of regions that are relatively time-saving, in the sense that they have a lower time elasticity of household production. Hence, migration will flow into time saving regions and housing costs in those regions will rise as real GDP grows." The implied geographical focus is on the United States.     

Culturally clustered or in the cloud? How amenities drive firm location decision in Berlin

Creative firms are neither capital‐ nor land‐intensive in production. They predominantly rely on creative and specialized labor and, assuming a strong competition for workers, are therefore increasingly dependent on the location of their (potential) employees. If these creative and highly qualified employees are attracted by consumption amenities such as bars, clubs, and restaurants, then it follows that these same amenities may determine the location of creative service firms. I investigate this hypothesis by examining whether Berlin Internet start‐up firms locate in urban amenity‐rich places. Identification builds on the fall of the Berlin Wall. A 1 percent increase in amenity density raises the probability of a start‐up location by almost 2 percent. A comparison with other service industries suggests that amenities are significant to the location choice of creative sectors, whereas no effect can be observed for nonreative firms.     

THE SOCIAL BENEFITS OF URBAN CULTURAL AMENITIES*

ABSTRACT. This paper uses a two-stage hedonic wage approach to derive the benefits from improvement of five cultural amenities. It is argued that the hedonic approach permits valuation of both private and local public aspects of cultural goods since access to the amenity is an essential input in the production of the final service flow. Empirical estimates of willingness to pay suggest price and income elasticities are approximately unity. Lower-bound estimates of marginal benefits for a representative city range from $0.85 million for an additional theater to $57.9 million for an additional zoo facility.     

ECONOMETRIC ANALYSIS OF HOUSING TRAIT PRICES IN A THIRD WORLD CITY*

ABSTRACT. A first step in the process of economic analysis of housing markets in Third World cities is the econometric analysis of housing trait prices. The information on market price of housing is basic to the derivation/estimation of other market parameters such as housing demand and supply elasticities. In addition, housing trait prices constitute invaluable inputs into the analysis of effects of government housing programs. This paper presents estimates of housing trait prices in a Third World city housing market, the city of Jos in Nigeria. Nonlinear stochastic specification of a policy constrained hedonic price function is presented as an unbiased estimator of housing trait prices. The Box-Cox statistical procedure was employed in the paper to obtain hedonic regression coefficients which are the parameters needed to compute the average prices evaluated both at the mean of each trait and at their margins. The potential uses of housing trait prices for policy analysis are discussed briefly.     

THE IMPACT OF CRIME ON APARTMENT PRICES: EVIDENCE FROM STOCKHOLM,SWEDEN

This study uses data of about 9,000 apartment sales in Stockholm, Sweden, to assess the impact of crime on property prices. The study employs hedonic pricing modelling to estimate the impact of crime controlling for other factors (property and neighbourhood characteristics). Geographic Information System (GIS) is used to combine apartment sales by coordinates with offences, land use characteristics and demographic data of the population. The novelty of this research is threefold. First, it explores a set of land use attributes created by spatial techniques in GIS in combination with detailed geographical data in hedonic pricing modelling. Second, the effect of crime in neighbouring zones at one place can be measured by incorporating spatial lagged variables of offence rates into the model. Third, the study provides evidence of the impact of crime on housing prices in a capital city of a traditional welfare state, information otherwise lacking in the international literature. Our results indicate that apartment prices in a specific area are strongly affected by crime in its neighbouring zones, regardless of crime type. When offences were broken down by types, residential burglary, theft, vandalism, assault and robbery individually had a significant negative effect on property values. However, for residential burglary such an effect is not homogenous across space, and apartment prices in central areas are often less discounted by being exposed to crime than those in the city's outskirts.