Full Citation

Title: Wages, Rents, Quality of Life

Citation Type: Miscellaneous

Publication Year: 2007

ISBN:

ISSN:

DOI:

NSFID:

PMCID:

PMID:

Abstract: Data from the NIPA and from the Decennial Census of Housing show that the house-hold expenditure share on housing is remarkably constant over time and across U.S. metropolitanareas (MSA). Consistent with this fact, we consider a basic frictionless model in which identicalhouseholds have Cobb-Douglas preferences for consumption and housing. Households choose anMSA in which to live, and MSAs differ in the income residents receive and in quality of life, whichis a multiplicative factor in the utility function. Like TFP in macroeconomics, differences acrossMSAs in quality of life enable us to reconcile observed wages and rents with the predictions of thetheory. In equilibrium, given our estimate of the expenditure share on housing at 0.24, and holdingquality of life constant, the difference in log rental prices of two MSAs must equal 4.2 times the dif-ference in log per-capita income. The model provides an exact methodology to estimate MSA-levelquality of life. We find that quality of life is significantly negatively correlated with population.

User Submitted?: No

Authors: Ortalo-Magne, Francois; Davis, Morris A.

Publisher: University of Wiscondin-Madison

Data Collections: IPUMS USA

Topics: Housing and Segregation, Other

Countries: