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Title: Metropolitan Area Quality of Life: Evidence from the 1980-2000 PUMS
Citation Type: Working Paper
Publication Year: 2004
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Abstract: House values, rents, and wages vary drastically across metropolitan areas throughout the U.S., and geographic price differentials persist over time. Much of this variation stems from fixed differences (amenities) across locations. Using individual-level data from the 1980, 1990, and 2000 Census five percent PUMS, I determine the extent to which amenities drive geographic differences in house values, rents, and wages. I account for the endogeneity of housing prices in the determination of wages and propose an alternate method, based on metropolitan area-level residuals from wage and housing price estimations, to proxy for the collective amenities and the quality of life associated with a particular location. I rank 250 metropolitan areas based on this quality of life measure. The results indicate that quality of life differences across metropolitan areas do persist over time; in each cross section, the locations commanding a housing premium are nearly identical for renters and homeowners. However, locations where individuals accept lower wages than one would predict given their demographic and human capital characteristics do not correlate to the locations dubbed attractive in housing price regressions. These findings hold for the total wage-earning population as well as each of four permanent income groups. I assess whether these results support an amenity-based (equilibrium) theory of geographic price differentials, and find support for an equilibrium interpretation during the 1980s but not the 1990s. Comparing my findings to data on specific amenity measures yields inconsistent results, making it difficult to conclude which amenities individuals are paying for in desirable locations.
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Authors: Greulich, Erica
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Data Collections: IPUMS USA
Topics: Other
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