No. 1/2015:For whom are cities good places to live?

Abstract

We use Norwegian data to evaluate the consumption hypothesis of geographical variation in educational attainment, i.e. that well-educated people particularly value the amenities provided by cities. Our results cast doubts on the hypothesis. After-tax real wages are higher in rural areas than in urban areas, suggesting that Norwegians are willing to forego purchasing power in order to enjoy urban amenities, but the urban purchasing power premium is roughly equal across education groups. Moreover, survey data in which respondents evaluate local amenities indicate a broad consensus between education groups about the advantages and disadvantages about city life as well as about the relationship between city size and the quality of local amenities.