Affiliation:
1. Department of Economics, Harvard University
2. Department of Economics, University of Chicago
Abstract
The location of individuals determines their job and schooling opportunities, amenities, and housing costs. We conceptualize the location choice of individuals as a decision to invest in a “location asset.” This asset has a current cost equal to the location's rent, and a future payoff through better job and schooling opportunities. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with high future returns. In contrast, borrowers transfer resources to the present by going to cheap locations that offer few other advantages. Holdings of the location asset depend on its comparison to other assets, with the distinction that the location asset is not subject to borrowing constraints. We propose a dynamic location model and derive an agent's mobility choices after experiencing income shocks. We document the investment dimension of location and confirm the core predictions of our theory using French individual panel data from tax returns.
Funder
Agence Nationale de la Recherche
Walter Chapin Simpson Center for the Humanities, University of Washington
Princeton University
Subject
Economics and Econometrics
Cited by
20 articles.
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