Measuring Quality of Life Under Spatial Frictions

Gabriel M. Ahlfeldt (), Fabian Bald (), Duncan H.W. Roth () and Tobias Seidel ()
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Gabriel M. Ahlfeldt: Humboldt University Berlin
Fabian Bald: European University Viadrina, Frankfurt / Oder
Duncan H.W. Roth: Institute for Employment Research (IAB), Nuremberg
Tobias Seidel: University of Duisburg-Essen

No 17549, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: 59 pages
Date: 2024-12
New Economics Papers: this item is included in nep-geo, nep-lma and nep-ure
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