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The Environmental Cost of Land Use Restrictions
Cities with cleaner power plants and lower energy demand have stricter land use restrictions; these restrictions increase housing prices and disincentivize living in these lower polluting cities. We use a spatial equilibrium model to quantify the effect of land use restrictions on household carbon emissions. Our model features heterogeneous households, cities that vary by power plant technology and the benefits of energy usage, as well as endogenous wages and rents. Relaxing restrictions in California to the national median leads to a 2.3% drop in national carbon emissions. The burden of a ...
Dynamic Responses to Immigration
I analyze the dynamic effects of immigration by estimating an equilibrium model of local labor markets in the US. The model includes firms in multiple cities and sectors which combine capital, skilled and unskilled labor in production, and forward-looking workers who choose their sector and location each period as a dynamic discrete choice. A counterfactual unskilled immigration inflow leads to an initial wage drop for unskilled workers and a wage increase for skilled workers. These effects dissipate rapidly as unskilled workers migrate away from heavily affected cities and workers shift ...
Heterogeneous Workers and Federal Income Taxes in a Spatial Equilibrium
This paper studies the incidence and efficiency of a progressive income tax in a spatial equilibrium. We use US census data to estimate an empirical spatial equilibrium with heterogeneous workers, landowners, and firms. The US income tax shifts skilled workers out of high-productivity cities, leading to a deadweight loss of 2% of tax revenue. Flattening the tax schedule significantly increases welfare inequality between skilled and unskilled workers and does not increase overall worker welfare, as the efficiency gains are captured by landowners. This suggests that progressive income taxes ...
Optimal Need-Based Financial Aid
We study the optimal design of student financial aid as a function of parental income. We derive optimal financial aid formulas in a general model. For a simple model version, we derive mild conditions on primitives under which poorer students receive more aid even without distributional concerns. We quantitatively extend this result to an empirical model of selection into college for the United States that comprises multidimensional heterogeneity, endogenous parental transfers, dropout, labor supply in college, and uncertain returns. Optimal financial aid is strongly declining in parental ...
The Indirect Fiscal Benefits of Low-Skilled Immigration
Low-skilled immigrants indirectly affect public finances through their effect on native wages & labor supply. We operationalize this general-equilibrium effect in the workhorse labor market model with heterogeneous workers and intensive and extensive labor supply margins. We derive a closed-form expression for this effect in terms of estimable statistics. We extend the analysis to various alternative specifications of the labor market and production that have been emphasized in the immigration literature. Empirical quantifications for the U.S. reveal that the indirect fiscal benefit of one ...