Income Sorting Across Space: The Role of Amenities and Commuting Costs in Geneva

Income Sorting Across Space: The Role of Amenities and Commuting Costs

11.12.2019 14:15 – 15:45

INSTITUTE OF ECONOMICS AND ECONOMETRICS SEMINAR / ABSTRACT

"We study the sorting of skill-heterogeneous consumers within and between cities. We allow for non-homothetic preferences and locations that are differentiated by their accessibility to exogenous amenities and distance to employment centers, where production is subject to local externalities. The residential equilibrium is driven by the properties of an amenity-commuting aggregator obtained from the primitives of the model. Using the model's structure and estimated parameters based on micro-data on the Netherlands, we predict that exogenous amenities are a key driver of social sorting. In the absence of amenities, the GDP increases by 10% because commutes are shorter. However, income segregation rises and 95% of consumers are worse-off."
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