Working Paper: NBER ID: w19922
Authors: David Albouy; Bert Lue
Abstract: We examine variation in local wage levels, housing costs, and commuting costs for 2071 areas covering the United States within and across metropolitan areas. In an equilibrium model of residential and workplace choice, we use these measures to construct a willingness-to-pay index for a typical household. When households are sufficiently homogeneous and mobile, this index indicates the perceived value of local household amenities, or “quality of life.” Wage levels vary little within metropolitan areas relative to across them, while individual characteristics that predict wages vary more within, suggesting patterns about sorting. Quality of life varies as much within metros as across them, and is typically high in areas that are dense, suburban, mild, safe, entertaining, and have higher school-funding.
Keywords: wages; housing costs; commuting costs; quality of life; urban economics
JEL Codes: H73; Q51; R21; R23; R41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| local wage levels vary little within metropolitan areas compared to across them (J31) | characteristics predicting wages show more variability within areas (J31) |
| quality of life varies significantly within and across metropolitan areas (R23) | better quality of life is associated with dense, suburban, safe, and well-funded school districts (I24) |
| rent levels are more strongly influenced by location than by individual characteristics (R21) | wage levels vary more across metro areas than within them (J31) |
| commuting costs negatively correlate with rents (R41) | higher commuting costs are associated with lower rents (R21) |