La Dolce Vita: Hedonic Estimates of Quality of Life in Italian Cities

Abstract

This paper provides an assessment of quality of life in Italian cities using the hedonic approach. We analyze micro-level data for housing and labor markets to estimate compensating differentials for local amenities within five domains: climate, environment, services, society and economy. The estimated implicit prices are used to construct overall and domain-specific quality of life indices. We find that differences in amenities are reflected in substantial compensating differentials in housing prices, whereas the effects on wages are relatively small. Quality of life varies substantially across space and is strongly related to differences in public services and economic conditions. Overall, quality of life is highest in medium-sized cities of the Center-North, displaying relatively high scores in all the domains considered. Northern cities fare better with respect to services, social and economic conditions, while relatively worse for climate and environmental conditions. JEL: C4, D5, H4, J3, J6, P2, P3, Q2, R2 Keywords: quality of life, hedonic prices, housing markets. * We gratefully acknowledge the Osservatorio del Mercato Immobiliare for data on housing transactions, and the Fondazione Rodolfo De Benedetti for labor market data. Financial support by the Italian Ministry of University and Research is gratefully acknowledged. We thank participants to conferences in Rotterdam (AREUEA), Firenze, and Aosta (AISRe) for helpful comments. The usual disclaimer applies.

Cities and Inequality

“…Increasing the index for educational services by one-standard deviation is valued e122, while the implicit prices associated with health services and cultural infrastructure are e91 and e7, respectively. The weakness of the influence of culture on housing and labor markets is common in hedonic studies on Milan and other Italian cities (for instance Colombo et al 2014, Brambilla et al 2013). This is a puzzling result demanding a deeper investigation.…”

“…For the housing and labor markets, we use the same data set of Colombo et al (2014) used to measure quality of life in the 103 cities. Housing market data are from the Real Estate Observatory of the Italian Ministry of Finance, and refer to individual house transactions in the 103 Italian provincial capitals between 2004 and 2010.…”

“…Housing prices and wages are measured at constant 2004 prices. As mentioned in Colombo et al (2014), the difference in the timing of the data between wages and housing prices is due to data availability. However considering that we are using only data on dependent employment (entrepreneurs and self-employed are not included) the cross-sectional variation across cities is relatively stable over time, and the actualization procedure applied to the data should account for the possible concerns on this issue 7 .…”

A Review of the Literature on Well-Being in Italy: A Human Development Perspective

“…Colombo, Michelangeli, and Stanca (2012) apply the "hedonic price" method to the evaluation of quality of life in 103 Italian provinces. They consider five domains and their relative impact on well-being is estimated by the market prices of housing, as an expression of willingness of individuals to pay to live in an environment with certain characteristics.…”

“…The work of Colombo et al (2012) is still anchored to a traditional view of quality of life which is measured in terms of market prices. This is obviously not in line with a human development framework according to which basic functionings are intrinsically, and not only instrumentally, relevant.…”