An Explicit Spatial Approach to the Value of Local Social Amenities in Metro and Non-Metro Counties in the U.S.: Implications for Comprehensive Wealth Measurement

Abstract

This study extends and reinterprets Roback’s general spatial equilibrium model by casting it within the comprehensive wealth framework. Considering the explicit spatial effects among regions, the analysis refines estimates of the contribution of natural, built, social, cultural, and human capital to residents’ wealth. We develop an empirical model and apply it to secondary data from 3109 counties in the United States. Our analysis provides a means of partitioning the sources of wealth in traditionally measured financial wealth and various types of amenities, while avoiding double counting the values of natural and publicly provided assets. Our findings indicate that rising property values are not simply an outcome of limited supply but are often an indicator of rising demand for improving amenities, suggesting different strategies for property and income taxation policy. There are apparently differences between the value of amenities in metro and non-metro counties. Our model explicitly estimates the spatial spillover and feedback effects of policy changes on local land values and wages. It also measures the differences in determinants of asset values and wages in metro from non-metro counties in the U.S.