Verlag:
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Zusammenfassung:
We employ a quantitative spatial model that accounts for trade fritions - generated by trade costs and non-tradable services - and mobility frictions - generated by idiosyncratic tastes and local ties - to recover unobserved quality of life (QoL) and estimate the urban QoL premium. For Germany, we find that a city twice as large offers, on average, a 22% higher QoL to the average resident - far exceeding the urban wage premium of 4%. Our model-based Monte Carlo simulations suggest that the lack of strong empirical evidence for an urban QoL premium in earlier literature likely stems from measurement error in the Rosen-Roback framework due to omitted spatial frictions.