DP11958 Who Lives Where in the City? Amenities, Commuting and Income Sorting

Author(s):	Carl Gaigné, Hans R.A. Koster, Fabien Moizeau, Jacques-François Thisse
Publication Date:	April 2017
Date Revised:	December 2018
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:	cepr.org/active/publications/discussion_papers/dp.php?dpno=11958

We study the sorting of income-heterogeneous consumers within cities. We allow for non-homothetic preferences and locations that are differentiated by their distance to employment centers and accessibility to exogenous amenities. The residential equilibrium is driven by the properties of an amenity-commuting aggregator obtained from the primitives of the model. Using micro-data on the Randstad (the Netherlands), we find that doubling the amenity level, resp. commuting time, attracts households whose incomes are 1 -2:5% higher, resp. 6 - 17:5% lower. Using the model's estimated parameters, we predict the impact of changes in accessibility to jobs and amenities on the social structure of the Randstad.