Amenity based location choices

Question 1

Amenity-based theory of location by income

Answer 1

Bruckner et al (1997)
Relative location of different income group depends on the spatial pattern of exogenous amenities in a city

Question 2

Two key assumptions

Answer 2

marginal valuation of amenities rises sharply with income

Rich prefer the suburbs

Question 3

3 types of amenity

Answer 3

Brueckner et al., 1999, Albouy, 2008

natural (exogenous) historical (pleasing infrastructure, monuments)
(exogenous of current day)
and modern amenities (endogenous)

Question 4

Detroit vs Paris

Answer 4

Central Paris a large amenity advantage based on the historical amenities

Amenity force works to reverse the conventional force that draws rich to suburbs

Detroit - lacks the rich history. thus nothing counters force pulling rich to suburbs

Question 5

The Forces competing

Answer 5

Alonso-Mills-Muth - rich preference for suburbs acts against the historical and modern amenities at the centre

Question 6

Modern amenities a cause or caused

Answer 6

exogenous approach fails to overcome issue of reverse causation (i.e. that amenities are in a certain area because the rich tend to be in that area)
‘It overlooks the possibility that urban amenities are a consequence rather than a cause of the location patterns of different income groups.’
Modern amenities – e.g. restaurants - constitute a major amenity, but their presence is partly a consequence of the high incomes of the local residents

When the rich value the income amenity more highly than the poor, multiple equilibria may exist, with the rich living either in the center or the suburbs.

Question 7

Why are cities different

Answer 7

European cities centre amenity heavy

US aren’t

natural amenities (river in centre) true to both

Historical amenities - longer history in Europe

Question 8

Rosen-Roback Framework

Answer 8

Exogenous vs Endogenous - natural vs artificial amenities (Albouy, 2008)

assumptions: single type of individual, optimal choice on location

Utility based on amenities constrained by wage - rents

idea that modern amenities = U (e,q,a,z)
e - non housing consumption
q - housing consumption
a - exogenous amenities
z - income group in a location

Question 9

Evidence of households paying more for amenities

Answer 9

Albouy, 2008
- 3.9% of income for all excessive cold in a typical area
- 2.9% of income to live in areas where 10% more of the day is sunny
- 1.7% to live close to coast

CANNOT BE SURE WHETHER THESE REFLECT THE TRUE VALUATION OF AMENITIES - CCC, path dependence, other independent variable

Remarkable these explain 70% of the variation
Limited only to urban areas with >100,000 residents though
Also finds that some artificial amenities have an impact on location decisions
High WTP to live in areas with many eating and drinking establishments, arts and culture, and better air quality
However, exogenous more important
Eg rivers for trade - all major US cities were on rivers or bodies of water up until 1900 (Fuerst, 2023)