The Geography of Life: Evidence from Copenhagen

We use newly constructed individual-level panel data for Denmark covering more than 30 years to understand the origins and consequences of spatial sorting by age and family status within cities. Based on our reduced-form evidence that disentangles sorting by age and family status from correlated individual effects, we develop a quantitative urban model with heterogeneity by skill, age, and family status. We use the quantified model to show that the most important mechanism driving spatial sorting is heterogeneity in preferences for local amenities, which highlights importance of amenities for understanding the spatial organization of cities. Finally, we use the model to explore the effect of demographic change such as population aging, falling fertility, and increasing numbers of single households on cities and find that their combined effect on cities will be substantially more muted than the effect of any of these changes on their own.