Valuing the Consumption Benefits of Urban Density

Despite growing interest in urban consumption amenities, little is known about their origin and importance. This paper estimates the consumption value of urban density by combining travel microdata with Google’s local business data. This dataset allows to integrate travel costs into a discrete choice model for restaurants. I find that in high density areas, consumers enjoy large benefits from visiting places that they prefer, and relatively smaller gains from shorter trip time. These results demonstrate the importance of non-tradable consumption in explaining the value of cities, and represent the first estimates of the gains from variety in the service sector.