Who Lives Where in Cities? Amenities, Commuting and Income Sorting

We study the sorting of skill-heterogeneous consumers within and between cities. We allow for non-homothetic preferences and locations that are di¤erentiated by their accessibility to exogenous amenities and distance to employment centers, where production is subject to spatial externalities. The residential equilibrium is driven by the properties of an amenity-commuting aggregator obtained from the primitives of the model. Using the model’s structure and estimated parameters based on micro-data on the Netherlands, we predict that exogenous amenities are a key driver of social sorting. In the absence of amenities, the GDP increases by 10% because commutes are shorter. However, income segregation rises. Keywords: cities, social strati…cation, income, amenities, commuting JEL classi…cation: R14, R23, R53, Z13. We are grateful to N. Baum-Snow, J. Brinkman, P.-A. Chiappori, P.-P. Combes, M.S. Delgado, R.J.G.M. Florax (y), M. Fujita, J.V. Henderson, M. Miyake, Y. Murata, H.G. Overman, P. Picard, G. Ponzetto, S. Proost, S. Riou, F. Robert-Nicoud, S.L. Ross, K. Schmidheiny, H. Takatsuka, P. Ushchev, and J.N. van Ommeren for insightful suggestions. We also thank participants to seminars at the LSE, the Higher School of Economics in Moscow, Purdue, the Workshop on Public Policies, Cities and Regions, the Utrecht School of Economics, Laval University, the 2017 Public Economic Theory conference, the summer school "Sustainable Cities", the 64th AFSE Congress, 32d EEA Congress, and the 7th North American Meeting of the Urban Economics Association, for their comments. The authors acknowledge, respectively, …nancial supports from the Agence Nationale de la Recherche (ANR-12-INEG-0002), the Institut Universitaire de France, the Netherlands Organisation for Scienti…c Research (VENI research grant), and the Russian Science Foundation under the grant N 18-18-00253. yINRA, UMR1302, SMART-LERECO Rennes (France) and CREATE, Laval University, Quebec (Canada). zDepartment of Spatial Economics, Vrije Universiteit Amsterdam (The Netherlands), HSE University (Russian Federation), Tinbergen Institute, and CEPR. xCREM (Condorcet Center), Université de Rennes 1. {CORE-UCLouvain (Belgium), HSE University (Russian Federation) and CEPR.