The increasing value of time raises the cost of commuting & exogenously increases the demand for central locations by high-skilled workers, magnified by endogenous amenity improvement

Su, Yichen, The Rising Value of Time and the Origin of Urban Gentrification (December 12, 2018). http://dx.doi.org/10.2139/ssrn.3216013

Abstract: I estimate a spatial equilibrium model to show that the rising value of high-skilled workers' time is an important driving force behind the gentrification of American central cities. I show that the increasing value of time raises the cost of commuting and exogenously increases the demand for central locations by high-skilled workers. While change in value of time is an initial force behind gentrification, its effect is substantially magnified by endogenous amenity improvement. The model implies that welfare inequality in the recent decades increases by more than the rise in earnings inequality if the forces behind gentrification are considered.

Keywords: urban, gentrification, spatial equilibrium, value of time, neighborhood, amenities, rent, housing supply, urban revival, inequality, work hours, long-hour premium, overtime
JEL Classification: J22, R12, R2, R31, R30, R31