Choosing Your Pond: Location Choices and Relative Income

144 Pages Posted: 25 Jul 2017 Last revised: 19 Aug 2018

See all articles by Nicolas L. Bottan

Nicolas L. Bottan

Cornell University - Department of Policy Analysis and Management

Ricardo Perez-Truglia

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Date Written: December 1, 2017

Abstract

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

Bottan, Nicolas Luis and Perez-Truglia, Ricardo, Choosing Your Pond: Location Choices and Relative Income (December 1, 2017). Available at SSRN: https://ssrn.com/abstract=3007167 or http://dx.doi.org/10.2139/ssrn.3007167

Nicolas Luis Bottan

Cornell University - Department of Policy Analysis and Management ( email )

Ithaca, NY
United States
6072555724 (Phone)

HOME PAGE: http://https://www.nicolasbottan.com

Ricardo Perez-Truglia (Contact Author)

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

HOME PAGE: http://www.anderson.ucla.edu/perez-truglia

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
172
rank
169,171
Abstract Views
921
PlumX Metrics