Who lives where in the city? Amenities, commuting and income sorting
We develop a new model of a “featureful” city in which locations are differentiated by two attributes, that is, the distance to employment centers and the accessibility to given amenities. The residential equilibrium involves the spatial separation of households sharing similar incomes. Under Stone-Geary preferences, amenities and commuting are subsumed into a location-quality index. Hence, the assignment of households to locations becomes one-dimensional. Since residential choices are driven by the location-quality index, the income mapping may be fully characterized. Using a rich micro-dataset on the Netherlands, we show that household income sorting is indeed driven by amenities and commuting times.