SOMETIMES CLOSE IS GOOD ENOUGH: THE VALUE OF NEARBY ENVIRONMENTAL AMENITIES*

Authors


  • *

    We are grateful to Bonggeun Kim for initial data collection as well as extremely helpful comments, and to Seiwoon Hwang, Tseli Mohammed, and Matthew Wibbenmeyer for research assistance. We would also like to thank Marlon Boarnet, Dan Hodge, Emma Hutchinson, Matthew Kotchen, Purvi Sevak, Stephen Sheppard, Lara Shore-Sheppard, three anonymous reviewers, and participants in the University of Michigan Public Finance Seminar for useful suggestions. All errors and omissions are our own.

Abstract

ABSTRACT An extensive empirical literature exists, showing that variations in region-specific amenities can account for persistent differences in real wages across regions. However, this literature has considered only amenities in the same location as the household. This paper argues that environmental amenities at some distance from but accessible to urban areas may lead to negative compensating wage differentials. We use a general equilibrium framework and data from the 1995 Current Population Survey to calculate implicit amenity prices based on measures of distance to environmental amenities. Our results suggest that amenities outside the metropolitan area do generate compensating wage differentials, as workers are willing to accept lower wages to live in accessible proximity to “nice” places. This implies that these places provide a positive externality to those communities that find them accessible. The estimated effects are quantitatively important, suggesting that these externalities should be taken into account in policy making.

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