Income Growth and the Distributional Effects of Urban Spatial Sorting

Victor Couture, Cecile Gaubert, Jessie Handbury and Erik Hurst

No 26142, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We explore the impact of rising incomes at the top of the distribution on spatial sorting patterns within large U.S. cities. We develop and quantify a spatial model of a city with heterogeneous agents and non-homothetic preferences for neighborhoods with endogenous amenity quality. As the rich get richer, demand increases for the high quality amenities available in downtown neighborhoods. Rising demand drives up house prices and spurs the development of higher quality neighborhoods downtown. This gentrification of downtowns makes poor incumbents worse off, as they are either displaced to the suburbs or pay higher rents for amenities that they do not value as much. We quantify the corresponding impact on well-being inequality. Through the lens of the quantified model, the change in the income distribution between 1990 and 2014 led to neighborhood change and spatial resorting within urban areas that increased the welfare of richer households relative to that of poorer households, above and beyond rising nominal income inequality.

JEL-codes: D11 R12 R13 R23 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-ure
Note: EFG PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Published as Victor Couture & Cecile Gaubert & Jessie Handbury & Erik Hurst, 2024. "Income Growth and the Distributional Effects of Urban Spatial Sorting," Review of Economic Studies, vol 91(2), pages 858-898.

Downloads: (external link)
http://www.nber.org/papers/w26142.pdf (application/pdf)

Related works:
Working Paper: Income Growth and the Distributional Effects of Urban Spatial Sorting (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26142

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26142

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().