Urban Population and Amenities: The Neoclassical Model of Location
We use a neoclassical general-equilibrium model to explain cross-metro variation in population, density, and land supply based on three amenity types: quality-of-life, productivity in tradables, and productivity in non-tradables. This elucidates commonly-estimated elasticities of local labor and housing supply and demand. From wage and housing-cost indices, the model explains half of observed density and total population variation, and finds jobs follow people more than people follow jobs. Land-area and density data are used to estimate elasticities of housing and land supply, and improve land-rent and local-productivity estimates. We show how relaxing land-use regulations and neutralizing federal taxes would affect different cities.
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This paper was revised on January 12, 2016
Document Object Identifier (DOI): 10.3386/w19919
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