Urban Quality of Life and Production Amenity in Chinese Cities

Abstract

Do firms and households like the same cities? Can the quality of the business environment be compatible with the quality of life? We develop a new methodology based on the Rosen–Roback general equilibrium model for answering these questions and apply it to newly collected and manually matched data from Chinese cities. In order to overcome the challenges that arise when measuring the desirability of cities, we set up indexes of production amenities as well as the urban quality of life, and use wages and housing costs to estimate the implied prices of cities, i.e., the residents’ and firms’ willingness to pay for urban features. Our examination of the dynamic trends and influencing factors shows that firms and households differ in preference over urban features, many cities which are attractive to firms are unattractive to households, and vice versa. More specifically, in China, households prefer cities with better leisure conditions, entertainment, culture, and education resources, while firms are willing to allocate production in cities with less sunshine, more rainfall, better infrastructure, and fewer environmental restrictions. Our paper provides a unified perspective on the measurement of urban quality of life and production amenity. We also give policy suggestions to get a better grip on the functions and roles of cities; this is of practical significance for sustainable urban development.