Income and Residential Location: Muth Revisited

Abstract

In Cities and Housing, Muth modeled residential location by income in terms of the conflicting desires for a low price of housing and access to CBD. This paper expands Muth's model to include in the location decision locational amenities other than access. Land values around Chicago are then used to estimate the income elasticities of the bids for access and five other amenities. The results indicate that the value of access may rise more rapidly with income than Muth expected and that, in the absence of other amenities and a durable housing stock, higher income residents would live closer to the CBD than low-income residents. Furthermore, other amenities may be important determinants of residential location patterns.