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Report
Tight credit conditions continue to constrain the housing recovery
The expansion of Federal Housing Administration lending has let households with imperfect credit or the inability to make a large down payment maintain access to mortgage borrowing. Rather than excluding such households, lenders have been applying strict underwriting conditions on all borrowers. Clarifying what constitutes approved lending may help relax credit conditions with minimal increase in risk.
Working Paper
Why are population flows so persistent?
Extending the neoclassical growth model to allow for mobile labor, small shocks to a local economy's productivity or quality of life along with small frictions to capital and labor mobility effect extended equilibrium transition paths. During such transitions local population may be far away from its steady-state level but local wages and housing prices remain relatively close to their steady-state levels. Exogenous technological progress together with a partially elastic local housing supply imply steady-state population flows from high productivity to high quality-of-life economies. In ...
Working Paper
Urban Growth Shadows
Does a location's growth benefit or suffer from being geographically close to large economic centers? Spatial proximity may lead to competition and hurt growth, but it may also generate positive spillovers and enhance growth. Using data on U.S. counties and metro areas for the period 1840?2017, we document this tradeoff between urban shadows and urban spillovers. Proximity to large urban centers was negatively associated with growth from 1840 to 1920, and positively associated with growth after 1920. Using a two-city spatial equilibrium model with intra-city and inter-city commuting, we show ...
Working Paper
How does labor mobility affect income convergence?
The neoclassical growth model is extended to allow for mobile labor. Following a negative shock to a small economy's capital stock, capital and labor frictions effect an equilibrium transition path during which wages remain below their steady-state level. Outmigration directly contributes to faster income convergence but also creates a disincentive for gross capital formation. The net result is that across a wide range of calibrations, the speed of income convergence is relatively insensitive to the degree of labor mobility.
Working Paper
How does openness to capital flows affect growth?
An average adjustment cost which is convex with respect to the rate of gross investment success-fully calibrates a neoclassical growth model to match real world observables including the transition paths of convergence speed, the shadow value of capital, interest rates, and savings rates. Comparing the open-economy and closed-economy versions of the calibrated model shows that relaxing the constraint that domestic savings finance domestic investment effects only a small increase in the growth rate of output per capita: less than one percentage point per year for an economy with current output ...
Working Paper
Is the speed of convergence constant?
Empirical attempts to measure the speed of convergence -- the rate at which a country's per capita income approaches its steady state relative to its distance from its steady state -- have started from the assumption that it is constant. In contrast, neoclassical models of capital accumulation usually predict that the speed of convergence decreases as income approaches its steady state. Estimating a flexible functional form which allows the speed of convergence to vary suggests that the speed of convergence actually increases as income approaches its steady state. An increasing speed of ...
Working Paper
A simple model of city crowdedness
Population density varies widely across U.S. cities. A calibrated general equilibrium model in which productivity and quality-of-life differ across locations can account for such variation. Individuals derive utility from consumption of a traded good, a nontraded good, leisure, and quality-of-life. The traded and nontraded goods are produced by combining mobile labor, mobile capital, and non-mobile land. An eight-fold increase in population density requires an approximate 50 percent productivity differential or an approximate 20 percent compensating differential. A thirty-two-fold increase in ...
Working Paper
A quantitative system of monocentric metros
The monocentric city framework is generalized to comprise a system of metros. A "representative" closed metro calibrates parameters and establishes a reservation utility and perimeter land price that must be matched by open metros. The open metros are assumed to have exogenous productivity below and above that in the representative metro. For a given level of productivity, transportation technology proves to be the most important quantitative determinant of population, land area, population density, and house prices across and within metros. Changes in highway capacity primarily affect ...
Working Paper
Productivity, congested commuting, and metro size
The monocentric city model is generalized to a fully structural form with leisure in utility, congested commuting, and the equalizing of utility and perimeter land price across metros. Exogenous and agglomerative differences in total factor productivity (TFP) drive differences in metro population, radius, land use, commute time, and home prices. Quantitative results approximate observed correspondences among these outcomes across U.S. metros. Traffic congestion proves the critical force constraining population. Self-driving cars significantly increase the sensitivity of metro population to ...
Working Paper
A productivity model of city crowdedness
Population density varies widely across U.S. cities. A simple, static general equilibrium model suggests that moderate-sized differences in cities? total factor productivity can account for such variation. Nevertheless, the productivity required to sustain above-average population densities considerably exceeds estimates of the increase in productivity caused by such high density. In contrast, increasing returns to scale may be able to sustain multiple equilibria at below-average population densities.