Bright Minds, Big Rent: Gentrification and the Rising Returns to Skill
January 2016
Working Paper Number:
CES-16-36R
Abstract
In 1980, Census data indicate, housing prices in large US cities rose with distance from the city center. By 2010, the relationship had reversed. We propose that this development can be traced to high-income households working longer hours. With little non-market time, proximity to work takes on added salience, leading high-income households to forgo suburban amenities and extending the gentrification trend beyond its 1970s niche status. In a tract-level data set covering the 27 largest US cities, years 1980-2010, we find support for our hypothesis. Using a Bartik-type demand shifter for skilled labor we find that full-time skilled workers favor centrality and the rising share in the population can account for the observed price changes in favor of the city center.
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