Discussion Paper Details

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Title: Quality of life in a dynamic spatial model

Author(s): Gabriel Ahlfeldt, Fabrian Bald, Duncan Roth and Tobias Seidel

Publication Date: December 2020

Keyword(s): COVID, Dynamic, Housing, migration, pollution, productivity, Quality of life, rents, spatial equilibrium and wages

Programme Area(s): International Trade and Regional Economics and Labour Economics

Abstract: We develop a dynamic spatial model in which heterogeneous workers are imperfectly mobile and forward-looking and yet all structural fundamentals can be inverted without assuming that the economy is in a stationary spatial equilibrium. Exploiting this novel feature of the model, we show that the canonical spatial equilibrium framework understates spatial quality-of-life differentials, the urban quality-of-life premium and the value of local non-marketed goods. Unlike the canonical spatial equilibrium framework, the model quantitatively accounts for local welfare effects that motivate many place-based policies seeking to improve quality of life.

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Bibliographic Reference

Ahlfeldt, G, Bald, F, Roth, D and Seidel, T. 2020. 'Quality of life in a dynamic spatial model'. London, Centre for Economic Policy Research.