Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311988 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17549
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Using a quantitative spatial model as a data-generating process, we explore how spatial frictions affect the measurement of quality of life. We find that under a canonical parameterization, mobility frictions - generated by idiosyncratic tastes and local ties - dominate trade frictions - generated by trade costs and non-tradable services - as a source of measurement error in the Rosen-Roback framework. This non-classical measurement error leads to a downward bias in estimates of the urban quality-of-life premium. Our application to Germany reveals that accounting for spatial frictions results in larger quality-of-life differences, different quality-of-life rankings, and an urban quality-of-life premium that exceeds the urban wage premium.
Subjects: 
housing
spatial frictions
rents
prices
productivity
quality of life
spatial equilibrium
wages
JEL: 
J2
J3
R2
R3
R5
Document Type: 
Working Paper

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