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Title: The Rising Value of Time and the Origin of Urban Gentrification
Citation Type: Miscellaneous
Publication Year: 2017
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Abstract: In the past three decades, American central city neighborhoods have experienced an influx of high-income, highly skilled residents and an exodus of low-income, low-skilled residents. This gentrification of central city neighborhoods has reversed decades of decline in urban centers. In this paper, I test the hypothesis that an important driving force behind gentrification is the rise in the value of highly skilled workers' time. To perform the test, I estimate a spatial equilibrium model of neighborhood choice. In the model, workers choose the neighborhood in which they live based on their value of time, commute times, rents, and amenities. I measure the differential growth in the value of time for each occupation by analyzing changes in the cross-sectional relationship between residual earnings and hours worked in Census data. My empirical strategy exploits the variation in the spatial distribution of jobs in different occupations. This allows me to separate the demand for shorter commute times from the demand for local amenities. I find that workers in occupations that experience greater growth in the value of time are more likely to locate in neighborhoods with shorter commute times. The initial shock to demand for central city housing by high-skilled workers creates endogenous amenity improvement in the affected neighborhoods, which furthers gentrification because additional high-skilled workers are attracted by the improved amenities. While the estimates of my model indicate that changes in the value of time are likely an important driving force behind gentrification, the effects are substantially magnified by endogenous amenity improvement. The estimates also imply that the welfare gap between high- and low-skilled workers (which takes into account not just earnings but also the value of time, rents, and amenities) has grown more than the earnings gap between high- and low-skilled workers.
Url: http://web.stanford.edu/~suyichen/jmp_yichensu.pdf
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Authors: Su, Yichen
Publisher: Stanford University
Data Collections: IPUMS USA, IPUMS NHGIS
Topics: Housing and Segregation, Land Use/Urban Organization
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