Quality of the Business Environment Versus Quality of Life: Do Firms and Households Like the Same Cities?

This paper develops a new measure of "quality of the business environment" that complements existing measures of "quality of life". An annual panel of these measures is constructed and analyzed for 37 cities from 1977 to 1995. Findings indicate that many cities attractive to firms are unattractive to households, and vice versa. In addition, the size of a city's workforce increases with the quality of the business environment while the presence of retirees declines. Additional specifications support theoretical arguments that retirees are drawn to cities in which local attributes are capitalized into lower wages rather than higher rents.