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Measuring Quality of Life Under Spatial Frictions

Author

Listed:
  • Ahlfeldt, Gabriel M.

    (Humboldt University Berlin)

  • Bald, Fabian

    (European University Viadrina, Frankfurt / Oder)

  • Roth, Duncan H.W.

    (Institute for Employment Research (IAB), Nuremberg)

  • Seidel, Tobias

    (University of Duisburg-Essen)

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

  • Ahlfeldt, Gabriel M. & Bald, Fabian & Roth, Duncan H.W. & Seidel, Tobias, 2024. "Measuring Quality of Life Under Spatial Frictions," IZA Discussion Papers 17549, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17549
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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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