Urban Population and Amenities

We use a frictionless neoclassical general-equilibrium model to explain cross-metro variation in population density based on three broad amenity types: quality of life, productivity in tradables, and productivity in non-tradables. Analytically, we demonstrate the dependence of quantities on amenities through substitution possibilities in consumption and production. Our calibrated model predicts large elasticities, consistent with variation in U.S. data, and estimates of local labor supply and demand. From only differences in wages and housing costs, we explain half of the variation in density, especially through quality-of-life amenities. We also show density information can provide or refine measures of land value and local productivity. We show how our approach can be used to study a wide variety of urban quantities.