University of Michigan Gateway Ford School

Are Big Cities Really Bad Places to Live? Improving Quality-of-Life Estimates across Cities

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February 2009

David Albouy

Abstract

The standard revealed-preference hedonic estimate of a city's quality of life is proportional to that city's cost-of-living relative to its wage-level. Adjusting the standard hedonic model to account for federal taxes, non-housing costs, and non-labor income produces quality-of-life estimates different from the existing literature. The adjusted model produces city rankings positively correlated with those in the popular literature, and predicts how housing costs rise with wage levels, controlling for amenities. Mild seasons, sunshine, and coastal location account for most quality-of-life differences; once these amenities are accounted for, quality of life does not depend on city size, contrary to previous findings.

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Keywords: Community Development, Economy and Economic Development, Housing, Land Use, Population & Demographics

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