Compensating Differentials and Evolution in the Quality-of-Life Among U.S. States

39 Pages Posted: 12 Nov 2001

See all articles by Joe Mattey

Joe Mattey

affiliation not provided to SSRN

William Wascher

Board of Governors of the Federal Reserve System

Stuart A. Gabriel

University of California, Los Angeles - Anderson School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 2001

Abstract

This paper provides the first application of the compensating differential paradigm to the evaluation of the extent and sources of evolution in state quality-of-life. The compensating differentials approach derives from early work by Rosen (1979) and Roback (1982), who showed how to extract quality-of-life measures from compensating differentials in wages and house prices. To date, however, empirical analysis of compensating differentials generally has been cross-sectional in nature and provides little insight as to the extent or determinants of changes over time in the quality of life. In this paper, we provide estimates of the evolution in quality-of-life rankings for U.S. states over the 1981- 1990 period. Our findings indicate that the quality-of-life rankings are relatively stable across model specifications and over time for certain poorly ranked, densely-populated Midwestern and eastern industrial states and also for other high quality-of-life rural western states. However, we find substantial deterioration in quality-of-life rankings in some states that experienced rapid population growth during the decade. Reduced spending on infrastructure, increased traffic congestion, and air pollution account for the bulk of the deterioration in quality-of-life in these states. As would be expected, improvement in those same factors is shown to result in marked ascension in quality-of-life ranks among other states.

Suggested Citation

Mattey, Joe and Wascher, William and Gabriel, Stuart A., Compensating Differentials and Evolution in the Quality-of-Life Among U.S. States (May 2001). Available at SSRN: https://ssrn.com/abstract=288614 or http://dx.doi.org/10.2139/ssrn.288614

Joe Mattey

affiliation not provided to SSRN

William Wascher

Board of Governors of the Federal Reserve System ( email )

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Stuart A. Gabriel (Contact Author)

University of California, Los Angeles - Anderson School of Management ( email )

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HOME PAGE: http://www.anderson.ucla.edu

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