DP15594 Quality of life in a dynamic spatial model
|Author(s):||Gabriel Ahlfeldt, Fabrian Bald, Duncan Roth, Tobias Seidel|
|Publication Date:||December 2020|
|Keyword(s):||COVID, Dynamic, Housing, migration, pollution, productivity, Quality of life, rents, spatial equilibrium, wages|
|JEL(s):||J2, J3, R2, R3, R5|
|Programme Areas:||Labour Economics, International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=15594|
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.