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Differentials in Nominal Wages and Prices Between Cities

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  • Oded Izraeli

Abstract

It is well known that great variations in money wages and prices can exist within a country even where these differentials are widely known and there is no legal barrier to mobility. This article investigates the possibility that the differential availability or quality of environmental goods (e.g. climate, clean air, public services) may be an explanatory variable. A model of a two-commodity world containing environmental and non-environmental goods is constructed, with samples from SMSAs being used in the estimation of wage and price equations: exogenous variables include population, air pollution, hazard, local services, property tax, climate, median age, net migration and unemployment. The analysis suggests that people are sensitive enough to the availability of environmental goods for this to explain most of the observed variation in wage rates and the price index.

Suggested Citation

  • Oded Izraeli, 1977. "Differentials in Nominal Wages and Prices Between Cities," Urban Studies, Urban Studies Journal Limited, vol. 14(3), pages 275-290, October.
    • Handle: RePEc:sae:urbstu:v:14:y:1977:i:3:p:275-290
    DOI: 10.1080/00420987720080621
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    References listed on IDEAS

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    1. Robert E. Hall, 1972. "Turnover in the Labor Force," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(3), pages 709-764.
    2. Victor R. Fuchs, 1967. "Introduction to "Differentials in Hourly Earnings by Region and City Size, 1959"," NBER Chapters, in: Differentials in Hourly Earnings by Region and City Size, 1959, pages 1-5, National Bureau of Economic Research, Inc.
    3. Victor R. Fuchs, 1967. "City Size Differentials," NBER Chapters, in: Differentials in Hourly Earnings by Region and City Size, 1959, pages 10-16, National Bureau of Economic Research, Inc.
    4. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    5. Victor R. Fuchs, 1967. "Differentials in Hourly Earnings by Region and City Size, 1959," NBER Books, National Bureau of Economic Research, Inc, number fuch67-1.
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    Cited by:

    1. Michael Raper, 1999. "Self-selection bias and cost-of-living estimates," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(1), pages 64-77, March.
    2. Michael L. Walden, 1997. "How Much Income Variation "Really" Exists Within a State?," The Review of Regional Studies, Southern Regional Science Association, vol. 27(3), pages 237-250, Winter.

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