Amitrajeet A. BATABYAL
Arthur J. Gosnell Professor of Economics, Department of Economics, Rochester Institute of Technology, Rochester, NY 14623-5604, USA
Seung Jick YOO
Associate Professor, Sookmyung Women’s University, Seoul, Republic of Korea
We study the decision problem faced by a city authority (CA) who seeks to attract members of the creative class to his city by providing amenities. Creative class members care about their own incomes and about the amenities that the city provides. We construct a stylized model of this interaction and shed light on three questions. First, we determine how much additional income must be paid to a representative creative class member to maintain her utility if amenities are withdrawn. Second, we compute the cost of generating amenity benefits that equal a specific fraction of the representative creative class member’s income. Finally, we discuss whether the provision of amenity benefits is a cost-effective way of raising the representative creative class member’s utility.
Keywords: Amenity Benefits, City Authority, Cost-Effectiveness, Creative Class, Income
JEL classification: R11, R50