Income and Household Location Choice in Switzerland

Abstract

We examine household location choice for eight cities in Switzerland. In line with other studies for Europe and the U.S., empirical evidence for the income gradient is weak in standard regression specifications that control for household characteristics and amenities. We provide a possible solution for this long-standing empirical puzzle and obtain negatively sloped income gradients that are postulated by the monocentric city model. We show that municipality taxes, a variable with particular spatial variation in Switzerland, play a dominant role in explaining households' cross-sectional arrangements. This has significant implications for policymakers, their local tax rate decisions, and the maximization of the tax substrate.