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Measuring quality of life under spatial frictions

Author

Listed:
  • Gabriel M. Ahlfeldt
  • Fabian Bald
  • Duncan H. W. Roth
  • Tobias Seidel

Abstract

Using a quantitative spatial model as a data-generating process, we explore how spatial frictions affect the measurement of quality of life. We find that under a canonical parameterization, mobility frictions---generated by idiosyncratic tastes and local ties---dominate trade frictions---generated by trade costs and non-tradable services---as a source of measurement error in the Rosen-Roback framework. This non-classical measurement error leads to a downward bias in estimates of the urban quality-of-life premium. Our application to Germany reveals that accounting for spatial frictions results in larger quality-of-life differences, different quality-of-life rankings, and an urban quality-of-life premium that exceeds the urban wage premium.

Suggested Citation

  • Gabriel M. Ahlfeldt & Fabian Bald & Duncan H. W. Roth & Tobias Seidel, 2024. "Measuring quality of life under spatial frictions," Berlin School of Economics Discussion Papers 0057, Berlin School of Economics.
    • Handle: RePEc:bdp:dpaper:0057
    DOI: 10.48462/opus4-5676
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    More about this item

    Keywords

    Housing; spatial frictions; rents; prices; productivity; quality of life; spatial equilibrium; wages;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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