Amenities, Housing Affordability, and Education Elites

Education Elites (i.e., higher-educated people) with new ideas and technologies are widely acknowledged to be a source of innovation and the engine of regional economic growth. A city that can attract higher-educated people will ultimately become the winner of future. This paper examines whether city amenities attract higher-educated people. Using three different datasets from China, we find that people with college degree or above are much more likely to choose the best amenity cites, which in fact results in 68.4% increase in the concentration of these higher-educated people. In addition, we find that people with master degree or above education can enjoy 45.61 percent income premium in the best amenity cities, and people with four-year college education can also enjoy 30.68 percent income premium. Furthermore, we find that these higher-educated people have much higher satisfaction on income and job promotion opportunity. However, with prices soaring in the best amenity cities, housing becomes increasingly unaffordable. In fact, we find strong evidence that the attractiveness of the best amenity cities has declined over time. This finding suggests that policies that curb the rapid increase in housing prices in the best amenity cities are necessary for local governments in order for their cities continuing to be the winner of future.