Choosing Your Pond: Location Choices and Relative Income
144 Pages Posted: 25 Jul 2017 Last revised: 19 Aug 2018
Date Written: December 1, 2017
We propose that, when individuals are deciding where to live, they care about the position in the income distribution in their prospective location. To test this hypothesis, we develop a new methodology to estimate preferences over location characteristics that combines choice data, survey data and information-provision experiments. We implement this methodology with a sample of 1,080 senior medical students who participated in the National Resident Matching Program. These subjects were choosing the cities to which they would move and live in for the next five years. We provide suggestive evidence that individuals care about what their relative income would be in a prospective city, and that those preferences have substantial heterogeneity by relationship status. Using a separate subject pool, we replicate our findings and provide tests for the underlying mechanisms.
Keywords: location choices, relative income, learning, field experiment
JEL Classification: D03, D60, D31, D80, I31, K34, Z10
Suggested Citation: Suggested Citation