Amenities and the Labor Earnings Function

Abstract

We show here that the return to education and several other concerns in the labor earnings literature are substantially impacted by amenity variation. Moreover, the nature of the impacts are in some cases counter-intuitive. For example, if higher education households move to nicer amenity locations, one might expect that this would lead to a downward bias in the return to education. It turns out that as an empirical matter, nice locations for households tend also to be still nicer from firms' perspectives with higher wages observed in such ares.

Keywords: amenities, returns to education, labor earnings function

JEL Classification: J20, J24, J31