Sarah Flèche : sarah.fleche[at]univ-amu.fr
Agnès Tomini : agnes.tomini[at]univ-amu.fr
We study the sorting of skill/income-heterogeneous consumers within and between cities. We allow for non-homothetic preferences and locations that are di§erentiated by their accessibility to exogenous amenities and distance to employment centers, where production is subject to local externalities. The residential equilibrium is driven by the properties of an amenity-commuting aggregator obtained from the primitives of the model. Using the modelís structure and estimated parameters based on micro-data of the Netherlands, we predict that exogenous amenities are a key driver of spatial sorting. Our general equilibrium counterfactual analysis shows that in the absence of amenities, the GDP increases by 10% because commutes are shorter. However, income segregation rises and 95% of consumers are worse-o§.