Discussion paper

DP15594 Quality of life in a dynamic spatial model

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.


Ahlfeldt, G, F Bald, D Roth and T Seidel (2020), ‘DP15594 Quality of life in a dynamic spatial model‘, CEPR Discussion Paper No. 15594. CEPR Press, Paris & London. https://cepr.org/publications/dp15594