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Measuring Quality of Life under Spatial Frictions

Author

Listed:
  • Fabian Bald

    (Europe University Viadrina)

  • Duncan Roth

    (Institute of Employment Research (IAB))

  • Seidel Tobias

    (University of Duisburg-Essen)

  • Gabriel M. Ahlfeldt

    (HU Berlin)

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 es-timates 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

  • Fabian Bald & Duncan Roth & Seidel Tobias & Gabriel M. Ahlfeldt, 2025. "Measuring Quality of Life under Spatial Frictions," Rationality and Competition Discussion Paper Series 522, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:522
    as

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    References listed on IDEAS

    as
    1. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
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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:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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