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
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)
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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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Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14981
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