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.