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What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values

David Albouy ()

No 14981, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This article examines and quantifies the relationship between local amenities and prices in an equilibrium model, demonstrating the role of non-traded goods and federal taxes. I derive formulae using factor shares to infer local land rents, productivity, and the total value of amenities from wage and housing-cost data, applying them to U.S. metropolitan areas. The formulae address how “wage multipliers,” heterogeneity in non-traded firm productivity, and tax-driven amenity value expropriation affect price capitalization. Wage and housing-cost variations across metros are driven more by productivity than quality-of-life differences. The most productive and valuable cities are typically coastal, sunny, mild, educated and large.

JEL-codes: H2 H4 J30 Q5 R1 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-eff, nep-geo and nep-ure
Note: EEE PE
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Published as “What Are Cities Worth? Land Rents, Local Productivity, and the Total Value of Amenities.” In The Review of Economics and Statistics, July 2016, 98(3): 477–487

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