Income Growth and the Distributional Effects of Urban Spatial Sorting

By Victor Couture, Cecile Gaubert, Jessie Handbury, Erik G. Hurst. Social Science Research Network, 2019

175 citations recorded by the source corpus.

We explore the impact of rising incomes at the top of the distribution on spatial sorting patterns within large U.S. cities. We develop and quantify a spatial model of a city with heterogeneous agents and non-homothetic preferences for neighborhoods with endogenous amenity quality. As the rich get richer, demand increases for the high-quality amenities available in downtown neighborhoods. Rising demand drives up house prices and spurs the development of higher quality neighborhoods downtown. This gentrification of downtowns makes poor incumbents worse off, as they are either displaced to the suburbs or pay higher rents for amenities that they do not value as much. We quantify the corresponding impact on well-being inequality. Through the lens of the quantified model, the change in the income distribution between 1990 and 2014 led to neighborhood change and spatial resorting within urban areas that increased the welfare of richer households relative to that of poorer households, above and beyond rising nominal income inequality.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/3b242d6890d90a3efdca2dcacfb5e0c709c67cee

Citations in the corpus

• Urban revival in America (2020, unknown): “We are exploring these welfare implications in complementary work (Couture et al., 2019).”
• The comparative advantage of cities (2020, unknown): “58 Couture et al. (2019) quantify such welfare implications of income growth by introducing idiosyncratic preferences shocks to a model of urban spatial sorting.”