Estimating Benefits from Regional Amenities: Internal Migration and Life Satisfaction

Abstract

This paper is the first to link economic theory with empirical life-satisfaction analyses referring to internal migration. We derive an extension of the Roback (1982) model to account for benefits from regional amenities in the utility function, while controlling for income, housing costs, and migration costs. Using highly disaggregated spatial panel information on people’s migration decisions and their life satisfaction for Germany, we provide an empirical investigation of the theoretical model by applying an individual fixed-effects model to rule out selection bias, while accounting for endogeneity of income. We find that short-term benefits from regional amenities represent about 21 percent of household income. These findings are robust to a number of alternative specifications.