City, Amenities, and Welfare

This chapter reviews the mechanisms through which amenities alter patterns of mobility and spatial distribution of population, and summarizes the role of amenities in urban development and on the inequality of labor welfare. The theoretical frameworks in the literature have gradually relaxed the assumption of frictionless spatial equilibrium, and papers can be categorized based on the endogeneity or exogeneity of amenities and the spatial scale of the research. A simple benchmark model and its extensions are used to illustrate how changes in amenities affect endogenous variables such as wages and rents, and drive the spatial sorting of labor. In this process, the endogenous amenities themselves are also subject to changes in the structure of the local labor force and the size of the regional population. Empirical evidence indicates that high levels of endogenous amenity can enhance the overall welfare of labor, but, under different conditions, they may amplify or diminish the inequality of welfare among heterogeneous labor groups, leading to uncertain changes in overall welfare that need to be assessed on a case-by-case basis. Therefore, amenities are a powerful tool for the government to regulate disparities in labor welfare. Additionally, the presence of amenities is a key factor leading to an inefficient spatial sorting of labor, which can be improved upon through specific policies.