An aggregate approach to estimating quality of life in micropolitan areas

Abstract

Because of their reliance on large samples of micro-level housing and wage data, quality of life studies using Rosen–Roback models have focused almost exclusively on metropolitan areas, largely ignoring non-metropolitan areas. Although understandable given data constraints, this dominant focus on metropolitans has limited the data-driven approaches available to policymakers concerned with community and economic development in small cities, or micropolitan areas. To address this gap, we develop an aggregate approach to estimate both quality of life and quality of the business environment in micropolitan areas utilizing county-level housing and wage data that can be used when large samples of micro-level data are unavailable. Specifically, we use the county residuals from wage and housing regressions to replace the fixed effects typically estimated from the micro-level estimations in quality of life studies. We find compelling evidence that higher quality of life is not only associated with higher employment and population growth and lower poverty rates, but that it is more important than quality of the business environment in determining the success of micropolitan areas.