Urban Pull: The Roles of Amenities and Employment

Abstract

This paper leverages new measurement of neighborhood consumption amenities to demonstrate that housing prices and rents in U.S. cities are likely determined as much by access to amenities as by access to employment. We extend the Alonso-Muth-Mills model, allowing residents to derive utility from within-city trips to amenities. The model delivers standard estimable log-linear pricing equations as well as new measures of amenities based on a destination’s popularity during leisure hours. We find our amenity measures add substantial explanatory power, have large effects in magnitude, and as much as halve naive estimates of commute costs such that employment and amenity access are similarly important. The findings hold using a wide variety of alternative measures and are neither driven by density nor fully explained by the locations of business establishments. These results suggest the potential robustness of cities to changes in employment locations.

Keywords: spatial equilibrium, amenities, commute costs, price gradient

JEL Classification: R30, R40, R12