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Income Sorting Across Space: The Role of Amenities and Commuting Costs

Carl Gaigne, Hans Koster, Fabien Moizeau () and Jacques Thisse

No 20-06, Working Papers SMART from INRAE UMR SMART

Abstract: We study the sorting of skill/income-heterogeneous consumers within and between cities. We allow for non-homothetic preferences and locations that are differentiated by their accessibility to exogenous amenities and distance to employment centers, where production is subject to local externalities. The residential equilibrium is driven by the properties of an amenity-commuting aggregator obtained from the primitives of the model. Using the model’s structure and estimated parameters based on micro-data for the Netherlands, we predict that exogenous amenities are a key driver of spatial sorting. Our general equilibrium counterfactual analysis shows that in the absence of amenities, the GDP increases by 10% because commutes are shorter. However, income segregation rises and 95% of consumers are worse-off.

Keywords: cities; social stratification; income; amenities; commuting (search for similar items in EconPapers)
JEL-codes: R14 R23 R53 Z13 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2020
New Economics Papers: this item is included in nep-geo and nep-ure
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