City Quality of Life Dynamics: Measuring the Costs of Growth
Matthew E. Kahn
University of Southern California; National Bureau of Economic Research (NBER)
The Journal of Real Estate Finance and Economics, Vol. 22, Issue 2 & 3
Two continuing California trends are population growth and improving air quality. Sprawl at the fringe of metropolitan areas may lower quality of life by contributing to congestion, reducing open space and raising pollution levels. This paper studies this claim by estimating hedonic wage and rental regressions using California 1980 and 1990 micro census data. Real rents have fallen in faster growing areas, suggesting that the "growth causes degradation" hypothesis has some merit. Sprawl's damage to local quality of life would be higher if fringe growth degrades air quality and households greatly value avoiding polluted areas. The relative importance of air quality as an urban amenity is tested using data from Los Angeles county, an area where dramatic improvements in smog have taken place. While high ozone areas feature lower rents, the ozone's capitalization suggests that it is not a key urban disamenity.
Keywords: quality of life, externalities and local growth
JEL Classification: Q25, R12, R23
Date posted: July 29, 2002