A new study, co-authored by faculty members from our institution, uncovers what people truly value in cities by analyzing the choices they make. Using economic theory, it ranks cities based on how much residents are willing to pay for the quality of life they offer. Unlike rankings that rely on subjective criteria—such as clean air or cultural attractions, which depend on researchers’ priorities—this approach provides a clear, objective view of what makes cities genuinely appealing.
The study also reveals fascinating trends among German cities. Munich and Hamburg have been locked in a competition for the top spot, trading places multiple times over the years—Hamburg took the lead in 2011, but Munich reclaimed it in 2019. Meanwhile, Berlin has been steadily climbing, moving from #4 in 2011 to #3 in 2015 and narrowing the gap with the top two.
The researchers used a cutting-edge quantitative spatial model that incorporates data on wages, housing costs, and local services, alongside trade costs—the expenses of moving goods and services between areas—and social ties, such as connections to family or community. These often-overlooked factors provide a more comprehensive picture of the trade-offs people consider when deciding where to live.
The study shows that in Germany, cities owe much of their population growth to superior quality of life rather than higher wages. Amenities like clean air, public spaces, green areas, and cultural opportunities play a bigger role in attracting residents than previously recognized. By highlighting the economic and social value of these non-market goods, the research introduces a new framework for urban planning, helping policymakers prioritize investments that enhance quality of life and make cities more appealing.
To support further research and decision-making, the authors have developed a Toolkit for Measuring Quality of Life under Spatial Frictions. This practical tool allows users to estimate the quality of life in cities using real-world data, providing actionable insights for urban planning and policy development.
This groundbreaking study was led by Berlin School of Economics members Gabriel M. Ahlfeldt (Humboldt University Berlin) and Fabian Bald (European University Viadrina), in collaboration with Duncan Roth (Institute for Employment Research) and Tobias Seidel (University of Duisburg-Essen).
Explore the Toolkit: qol.ahlfeldt.com
Read the Paper: BSoE_DP_0057.pdf
On the Authors
Gabriel Ahlfeldt
Professor Gabriel Ahlfeldt was recently appointed as a new faculty member of the Berlin School of Economics and has taken on the Chair of Econometrics at Humboldt University of Berlin. In addition to his work in Berlin, he is closely affiliated with the London School of Economics, the LSE-CEP, CESifo, and CEPR. His extensive expertise in quantitative spatial and urban economics spans a wide range of topics, including financial, labor, and real estate markets, as well as questions of political economy.
Fabian Bald
Prof. Dr. Fabian Bald is a Junior Professor of Regional and Urban Economics at the European University Viadrina and a member of the Berlin School of Economics. His focus is on economic inequalities, migration, and regional labor markets. He holds a Ph.D. from the University of Duisburg-Essen and co-organizes the Berlin Quantitative Spatial Economics Seminar.
Duncan Roth
Dr. Duncan H.W. Roth is a senior researcher at the Institute for Employment Research (IAB) in Nuremberg, specializing in labor and urban economics. His work focuses on employment trajectories, worker-firm dynamics, and regional quality of life. He holds a Ph.D. from Philipps-Universität Marburg.
Tobias Seidel
Prof. Dr. Tobias Seidel is a Professor of Economics at the University of Duisburg-Essen. His research focuses on regional and urban economics, international trade, and labor markets. He also leads the German Economic Association’s Standing Field Committee on Regional and Urban Economics.
