What Are Cities Worth? Land Rents, Local Productivity, and the Capitalization of Amenity Values
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.
Published Versions
“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
More from NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Retirement and Disability, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
