Measuring quality of life under spatial frictions

Gabriel M. Ahlfeldt, Fabian Bald, Duncan H. W. Roth and Tobias Seidel

No 57, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: Using a quantitative spatial model as a data-generating process, we explore how spatial frictions affect the measurement of quality of life. We find that under a canonical parameterization, mobility frictions---generated by idiosyncratic tastes and local ties---dominate trade frictions---generated by trade costs and non-tradable services---as a source of measurement error in the Rosen-Roback framework. This non-classical measurement error leads to a downward bias in estimates of the urban quality-of-life premium. Our application to Germany reveals that accounting for spatial frictions results in larger quality-of-life differences, different quality-of-life rankings, and an urban quality-of-life premium that exceeds the urban wage premium.

Keywords: Housing; spatial frictions; rents; prices; productivity; quality of life; spatial equilibrium; wages (search for similar items in EconPapers)
JEL-codes: J2 J3 R2 R3 R5 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2024-12-18
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0057

DOI: 10.48462/opus4-5676

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