Valuation of Metropolitan Quality of Life in Wages and Rents

This analysis uses intermetropolitan differences in quality of life to estimate the value that residents place on metropolitan amenities and disamenities in land and labor markets. Using individual-level data from the 1980 and 1990 Census of Population and Housing merged with metropolitan-level economic, social, and environmental factors, it estimates hedonic wage and rent equations to derive the value of amenities and disamenities for 257 metropolitan areas in the United States. Additionally, the extent to which capitalization of urban amenities and disamenities changes over time is examined. Results show that the valuation of the urban environment changes over time. Amenities appear to play a stronger role in the housing market compared to the labor market. Capitalization appears to adjust in a dynamic process resulting from disequilibrium in the marketplace and/or changes in consumer preferences.