Faculty Spotlight: Jessie Handbury

Jessie Handbury is Assistant Professor of Real Estate at The Wharton School, NBER Research Fellow, and Penn IUR Faculty Fellow. Her work focuses on the spatial distribution of consumption amenities: the goods and services that are available to consumers in different neighborhoods (e.g., the mix of restaurants, retail, nightlife, public services, neighborhood aesthetics, etc.). She asks how access to these amenities varies over space depending, in particular, on local demographics, and she measures the implications of these spatial disparities on real income inequality. She has been widely quoted in national media outlets including the New York Times and The Wall Street Journal.

Your research describes the role of urban consumption amenities on urbanization. Can you comment on how important these are to urban revitalization, particularly to attracting young college graduates to cities?

Traditionally we think that the major factors determining where households choose to live are proximity to work and to high wages, offset by how much housing costs. Some research has been done on public amenities like school quality, but for the most part amenities have been a little bit in the background.

But, recently, it has become apparent in the data that types of endogenous amenities called consumption amenities—local services, retail, bars, gyms, and the like—are important for household location-decisions, particularly for younger households who are moving back into downtowns at a higher rate than they were previously and are staying for longer.

That is explained at least in part by these households’ increased taste for the amenities cities offer. Rather than going to a grocery store and buying food and cooking at home and having a dinner party, they want to go out to a restaurant or a bar and make friends there. Rather than working out in their gym in the basement or going for a run, they want to meet up with 30 other people at a SoulCycle class.

Partly this is social, partly networking, and partly it’s outsourcing what these households might have otherwise done themselves. It’s related to the fact that they have higher incomes—so their opportunity cost in time is higher and they have more money to spend on relative luxuries. There are other elements at play in the revitalization of downtowns, but consumption amenities are an important factor.

Your research also shows the implications for urban amenity costs to income distribution. Can you explain your findings on this?

High-skilled, college-educated people have seen their nominal incomes rise. When thinking about consumption amenities, it’s important to look also at purchasing power—not just how many dollars someone earns, but what they can get with those dollars.

Consumption amenities arise endogenously—when more higher-income households live in a given area, more amenities that cater to their taste spring up. As high-income, college-educated people move into cities, they live increasingly in pockets of downtown—pockets that are effectively being gentrified. These households’ cost of living—the cost to them of getting utility—is decreasing because they have more and more exciting amenities to spend their money on. So not only is their nominal income growing, but also their cost of living has gone down.

When these high-skill, high-income households move downtown, they often are moving into areas with a lot of lower-income residents—and they drive up housing costs, rents. Meanwhile, lower-income people haven’t seen their nominal incomes grow nearly as much as higher-income people—if anything they’ve stagnated over the past 10 or so years. So, lower-income urban households are seeing their cost of living increase as their income stagnates.

The result is a widening of real income inequality that is greater than it might have been had we not seen the spatial reshuffling of the college-educated back downtown.

How do you think the after-effects of the pandemic will change the role of urban amenities?

My sense is that the the long-run impact of the pandemic on cities will be tied to the increasing prevalence of remote work. Let’s suppose that, on average, downtown firms choose to let their workers work remotely two days a week—that’s roughly a 40 percent reduction in the number of office workers going in to work downtown on any given day. Effectively, that’s less demand for those urban consumption amenities we just talked about—the restaurants, gyms, bars, and so on—since they rely on both the downtown residents as well as the commuting population. I think that the downtown’s comparative advantage of providing these amenities will be undercut by an increase in remote work.

Further, because college-educated workers are the ones who are offered the opportunity to work from home, it’s college-educated workers whose commuting costs will go down. If they only have to commute in three days a week, the suburbs are more attractive to them than they would be if they had to commute in five days a week. I think we’ve already seen some return to the suburbs post-COVID. I don’t think it means a total reversal of the trend toward urban revival, but I do think that it will slow things down quite a bit.

What drew you to the field of urban economics? How did you come to focus in particular on the role of urban consumption amenities?

In my PhD, I studied international trade and industrial organization. I was really interested in differences in demand for products. So, my entry point to urban economics was simply that the same forces that govern international trade and the availability of products in different countries also govern the availability of products in different cities and in different neighborhoods within a city.

From there, I became interested in how the availability of products across space relate to household location-decisions and firm location-decisions—and that effectively made me an urban economist.

Did you have that realization while you were getting your PhD, or after the fact?

That was after the fact. Urban economics wasn’t a field in my PhD program. I’d never taken an urban economics class. When I was hired at Wharton, I was excited to find departments full of people who are interested in the same things that interest me.

What draws me to urban economics and what keeps me studying questions of urban consumption amenities is that these questions affect my everyday life, and the everyday lives of my students and the people I meet in the world. I like studying something that matters to my community.

What opportunities do you see for working with Penn IUR in the future?

I think one of the best things about Penn IUR is that it creates opportunities to have cross-disciplinary conversations. While working on food deserts and gentrification, I really benefitted from talking to people coming to the topic from different angles. You don’t get that opportunity when you’re in a siloed department. I see opportunities for working with Penn IUR to bring together different perspectives in cross-disciplinary panels and discussions.