Real Estate Cost and the Spatial Distribution of Unobserved Human Capital: A Test Based on Obesity

28 Pages Posted: 20 Apr 2016

See all articles by Stephen Popick

Stephen Popick

Federal Deposit Insurance Corporation

Anthony M. Yezer

George Washington University - Department of Economics

Date Written: April 19, 2016

Abstract

Tests based on years of education find that the return to human capital in cities varies inversely and average education varies directly with housing cost. Finally, there is evidence that labor productivity within cities varies directly with employment density and real estate cost. The income elasticity hypothesis explains these inter-city results based on the low income elasticity of demand for a primary residence. Urban producer theory explains both inter- and intra-city differences by assuming that labor is a congestible input so that producers substitute workers with more human capital when space costs rise.

This paper conducts a new test of these two hypotheses. The new test uses obesity, rather than education. The empirical results confirm the theory that both among and within cities, there is a relation between differences in unobservable human capital and differences in the price of real estate. The results confirm the theoretical prediction that all forms of human capital respond to real estate cost, and effects of differences in education and obesity are similar. This implies that empirical studies of the distribution of and return to human capital should consider real estate costs.

Keywords: real estate costs, obesity, human capital, omitted variables bias, labor force, skill

JEL Classification: R10, R23, I10, J10

Suggested Citation

Popick, Stephen and Yezer, Anthony M., Real Estate Cost and the Spatial Distribution of Unobserved Human Capital: A Test Based on Obesity (April 19, 2016). Available at SSRN: https://ssrn.com/abstract=2767052 or http://dx.doi.org/10.2139/ssrn.2767052

Stephen Popick (Contact Author)

Federal Deposit Insurance Corporation ( email )

550 17th Street NW
Washington, DC 20429
United States

Anthony M. Yezer

George Washington University - Department of Economics ( email )

Monroe Hall, Suite 340
2115 G Street, NW
Washington, DC 20052
United States

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