Location as an Asset
The location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a ?location asset?. This asset has a cost equal to the location?s rent, and a payoff through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the ...
Migration, Congestion Externalities, and the Evaluation of Spatial Investments
The direct benefits of infrastructure in developing countries can be large, but if new infrastructure induces in-migration, congestion of other local publicly provided goods may offset the direct benefits. Using the example of rural household electrification in South Africa, we demonstrate the importance of accounting for migration when evaluating welfare gains of spatial programs. We also provide a practical approach to computing welfare gains that does not rely on land prices. We develop a location choice model that incorporates missing land markets and allows for congestion in local land. ...
Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock
We develop a dynamic trade model with spatially distinct labor markets facing varying exposure to international trade. The model captures the role of labor mobility frictions, goods mobility frictions, geographic factors, and input-output linkages in determining equilibrium allocations. We show how to solve the equilibrium of the model and take the model to the data without assuming that the economy is at a steady state and without estimating productivities, migration frictions, or trade costs, which can be difficult to identify. We calibrate the model to 22 sectors, 38 countries, and 50 U.S. ...
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 ...
Congestion, Agglomeration, and the Structure of Cities
Supersede WP 13-25. Congestion costs in urban areas are significant and clearly represent a negative externality. Nonetheless, economists also recognize the production advantages of urban density in the form of positive agglomeration externalities. The long-run equilibrium outcomes in economies with multiple correlated but o setting externalities have yet to be fully explored in the literature. Therefore, I develop a spatial equilibrium model of urban structure that includes both congestion costs and agglomeration externalities. I then estimate the structural parameters of the model using a ...
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 ...
Commuting, Labor, and Housing Market Effects of Mass Transportation: Welfare and Identification
REVISED MARCH 2019 This paper studies the effects of Los Angeles Metro Rail on the spatial distribution of people and prices. Using a panel of bilateral commuting flows, I estimate a quantitative spatial general equilibrium model to quantify the welfare benefits of urban rail transit and distinguish the benefits of reduced commuting frictions from other channels. The subway causes a 7%-13% increase in commuting between pairs of connected tracts; I select plausible control pairs using proposed subway and historical streetcar lines to identify this effect. The structural parameters of the model ...
Domestic vs. International Welfare Gains from Trade
Using varieties of a rich model that considers sectoral heterogeneity and input-output linkages, this paper shows that the overall welfare gains of a region within a country can be decomposed into domestic versus international welfare gains from trade. Empirical results based on state-level data from the U.S. suggest that about 91 percent of the overall welfare gains of a state are due to domestic trade with other states, on average across alternative model specifications, with a range between 72 percent and 99 percent across states. When national-level data are used for the U.S., ...
The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy
We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to the rest of the economy. The quantitative model we develop features pairwise interregional trade across all 50 U.S. states, 26 traded and non-traded industries, labor as a mobile factor, and structures and land as an immobile factor. We allow for sectoral linkages in the form of an intermediate input ...
The Case of the Reappearing Phillips Curve: A Discussion of Recent Findings
The Phillips curve seems to have flattened over time. In this article, we use a simple New Keynesian model to analyze potential pitfalls in the estimation of the slope of the structural Phillips curve.