DP11958 Amenities and the Social Structure of Cities

Author(s): Carl Gaigné, Hans Koster, Fabien Moizeau, Jacques-François Thisse
Publication Date: April 2017
Keyword(s): amenities, cities, commuting, Income, social stratification
JEL(s): R14, R23, R53, Z13
Programme Areas: International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11958

We develop a new model of a "featureful" city in which locations are differentiated by two attributes, that is, the distance to employment centers and the accessibility to given amenities, and we show how heterogeneous households in income are sorted out across the urban space. Under Stone-Geary preferences, the spatial income distribution is governed by a location-quality index which reflects the interaction between the amenity and commuting cost functions. The residential equilibrium typically involves the spatial separation of households sharing similar incomes. Using data on Dutch cities, we show that there is a causal relationship between the amenity level and consumer income, suggesting that richer households sort themselves into high amenity locations. We do not find strong evidence that employment accessibility leads to income segregation, suggesting that the standard monocentric city model without amenities is a poor predictor of the social structure of cities.