Amenities and Fringe Benefits: Omitted Variable Bias |
| |
| Authors: | Philip E. Graves Robert L. Sexton Michelle M. Arthur |
| |
| Affiliation: | Professor Philip E. Graves teaches economics at the University of Colorado, Boulder, C0 80302. Email: . Professor Graves'research interests include the role of amenities in human location and relocation, hedonic valuation, and miscellaneous applied microeconomic topics. He is the author of six books and more than fifty referred journal articles.;Professor Robert L. Sexton is Distinguished Professor of Economics at Seaver College and the School of Public Policy at Pepperdine University, Malibu, CA 90263. Email: . Professor Sexton's research interests include statute and enforcement costs, migration, and regional economic growth and development. He is the author of Exploring Economics;(Harcourt College Publishers, ). Michelle Arthur is a graduate student in the Institute of Labor and Industrial Relations Department. University of Illinois, 504 East Armory, Champaign, IL 61820. Email: .Ms. Arthur's interests include gender wage differentials. |
| |
| Abstract: | ABSTRACT If labor is fairly mobile, as it is in the United States, one would expect that households would move from less desirable areas toward more desirable areas until all areas are equally desirable. The way that areas become equally desirable is through the impact of movers on wages and rents (and possibly endogenous disamenities, such as congestion or pollution). That is, as people move to desirable areas, they will increase the demand for land (raising rents) and increase the supply of labor (lowering wages); in equilibrium, the wage and rent compensation for the niceness of an area reveals, in dollar terms, just how nice the area is. Blomquist, Berger, and Hoehn 1988 demonstrated the empirical importance of such amenity compensation in estimates of the quality-of-life in urban areas. However, those authors were unable to include fringe benefits, which are about 40 percent of explicit wage payments, in their wage compensation. This matters greatly as amenities are seen here to be even more important than previously thought and the regional implications are pronounced, with the West and Southeast looking better when fringe benefits are included and the East North Central and Northeast looking substantially worse. |
| |
| Keywords: | |
|
|
