Research
Publications
"Heterogeneity, Frictional Assignment and Home-ownership," with Allen Head and Huw Lloyd-Ellis
International Economic Review (2023)
We study the long-run composition of the housing stock across city-level ownership and rental markets in a dynamic equilibrium model of frictional assignment. Newly constructed and existing houses may be rented or sold to heterogeneous households that sort over housing quality. Due to the endogenous interaction between matching frictions and an ownership surplus that rises with quality, more housing is offered for sale per buyer in higher quality segments. Consequently, even in the absence of financial frictions and constraints on which houses can be rented, higher income households are more likely to own and lower quality housing is more likely to be rented. When calibrated to match key features of housing markets in the average U.S. city, the model is qualitatively consistent with observed cross-city relationships between underlying determinants and key market outcomes. We study the implications of the model for affordability and ownership across cities and for the impact of progressive property taxes and other affordable housing policies.
"The Effects of a Targeted Financial Constraint on the Housing Market" with Lu Han, Chandler Lutz and Benjamin M. Sand
Review of Financial Studies (2021)
We study the housing market implications of financial constraints by exploiting a regulatory change that increases the downpayment requirement for homes that sell for $1M or more. Using Toronto data, we find that the policy causes excess bunching of homes listed at $1M, heightened bidding intensity for these homes, but only a muted response in sales. While difficult to reconcile in a frictionless market, these findings are consistent with the implications derived from an equilibrium search model with auctions and financial constraints. Our analysis points to the importance of designing macroprudential policies that recognize the strategic responses of market participants.
"Posted Prices, Search and Bargaining"
Review of Economic Dynamics (2019)
A model of a decentralized market is developed that features search frictions, advertised prices and bargaining. Sellers can post ask prices to attract buyers through a process of directed search, but ex post there is the possibility of negotiation. Similarly, buyers can advertise negotiable bid prices to attract sellers. Even when transaction prices often differ from quoted prices, bid and ask prices play a crucial role in directing search and reducing trading frictions. The theory endogenizes the direction of search and provides insight about the prevalence of posted prices in the absence of full commitment by market participants to transact at the advertised price.
"From Engineer to Taxi Driver? Language Proficiency and the Occupational Skills of Immigrants," with Susumu Imai and Casey Warman
Canadian Journal of Economics (2019)
We examine the ability of immigrants to transfer the occupational human capital they acquired prior to immigration. We first augment a model of occupational choice to study the implications of language proficiency on the cross-border transferability of occupational human capital. We then explore the empirical predictions using information about the skill requirements from the O*NET and a unique dataset that includes both the last source country occupation and the first four years of occupations in Canada. We supplement the analysis using Census estimates for the same cohort with source country occupational skill requirements predicted using detailed human capital related information such as field of study. We find that male immigrants to Canada were employed in source country occupations that typically require high levels of cognitive skills, but rely less intently on manual skills. Following immigration, they find initial employment in occupations that require the opposite. Consistent with the hypothesized asymmetric role of language in the transferability of previously acquired cognitive and manual skills, these discrepancies are larger among immigrants with limited language fluency.
"Commitment and Costly Signaling in Decentralized Markets"
International Economic Review (2016)
I propose a search model of a decentralized market with asymmetric information in which sellers are unable to commit to asking prices announced ex ante. Relaxing the commitment assumption prevents sellers from using price posting as a signaling device to direct buyers' search. Private information about the gains from trade and inefficient entry on the demand side then contribute to market illiquidity. Endogenous sorting among costly marketing platforms can facilitate the search process by segmenting the market to alleviate information frictions. Seemingly irrelevant but incentive compatible listing fees are implementable provided that the market is not already sufficiently active.
Under Review
"Fighting for Fares: Uber and the Declining Market Price of Licensed Taxicabs," with Alina Garnham
In this paper, we study how the emergence of Uber in a large North American city affects the financial value of taxicab licenses. A taxicab license provides a claim to a stream of dividends in the form of rents generated by operating the taxicab or leasing the license. The introduction of Uber undoubtedly affects the anticipated stream of dividends because Uber drivers capture part of the farebox revenue that might otherwise go to the owners/drivers of licensed taxicabs. At the same time, the launch of Uber's innovative technology-driven approach to the provision of ride-hailing services can be viewed as a partial obsolescence of the traditional taxicab approach. The economic incentives facing market participants may therefore change as Uber gains momentum in the ride-hailing market, which could further affect the market value of licensed taxicabs. Using transaction-level data, we apply a theory of asset pricing to the secondary market for Toronto taxicab licenses to explore these potential price effects. We learn that both the farebox and innovation effects contribute to the overall decline in market value, with the farebox effect accounting for just over half of the $170K price decline from 2011 to 2017. We explore the welfare implications for taxicab license owners with counterfactual simulations. We find that, consistent with the anti-Uber protests organized by Toronto taxi drivers, there was a high willingness to pay among license holders to prevent or postpone the launch of Uber's ridesharing services.
Work in Progress
"Occupational Wages and Skill Portfolios," with Jacob Loree
[paper coming soon]
In this paper we develop a method for estimating occupation-specific skill portfolios that exploits variation in both wages and multidimensional skill ratings. We first present a model of occupational sorting to derive relationships between skills and wages across occupations. We then use these relationships to construct skill measures from wage and O*NET skill and ability data using interpolating polynomials. The resulting skill measures use a common interval scale in log wage units. This allows for straightforward comparisons across occupations, linear aggregation across skills, and an intuitive interpretation of the various components of each skill portfolio. We apply our skill measures to worker-level data and decompose the returns to schooling into skill components. We find that education is associated primarily with returns to cognitive skills (literacy, numeracy, and analytical) rather than motor and interpersonal skills.
"Intermediation as a Market Solution to Adverse Selection," with Sonja Chen, Matthew Doyle and Francisco Gonzalez
In this paper we develop a theory of intermediated decentralized exchange in a setting with anonymous short-lived traders, long-lived intermediaries, and asymmetric information. Counterparty risk stems from the fact that sellers are perfectly informed about quality, whereas buyers are uninformed. Intermediaries are no better suited for exchanging goods than the traders themselves except that they are long-lived and thus face different incentives. The mere presence of intermediaries does not eliminate counterparty risk. In fact, it exacerbates the problem because intermediaries themselves are a source of counterparty risk. Intermediaries can nevertheless solve the adverse selection problem by leveraging their reputation. In doing so, however, they capture a large share of the gains from trade. We formalize the idea that supranormal profits are necessary to cover the (endogenous) costs of maintaining the intermediaries' reputation.
Other Papers
"Information, Commitment, and Separation in Illiquid Housing Markets,"
(OLD VERSION of "Commitment and Costly Signaling in Decentralized Markets")
I propose a model of the housing market using a search framework with asymmetric information in which sellers are unable to commit to asking prices announced ex ante. Relaxing the commitment assumption prevents sellers from using price posting as a signalling device to direct buyers' search. Adverse selection and inefficient entry on the demand side then contribute to housing market illiquidity. Real estate agents that can improve the expected quality of a match can segment the market and alleviate information frictions. Even if one endorses the view that real estate agents provide no technological advantage in the matching process, incentive compatible listing contracts are implementable as long as housing is not already sufficiently liquid. The theoretical implications are qualitatively consistent with the observed trends in real estate brokerage: platform differentiation, endogenous sorting, and listing contract features that reinforce incentive compatibility.
"Tenure Insecurity, Adverse Selection, and Liquidity in Rural Land Markets"
A theory of land market activity is developed for settings where there is uncertainty and private information about the security of land tenure. Land sellers match with buyers in a competitive search environment, and an illiquid land market emerges as a screening mechanism. As a consequence, adverse selection and an insecure system of property rights stifle land market transactions. The implications of the theory are tested using household level data from Indonesia. As predicted, formally titled land is more liquid than untitled land in the sense that ownership rights are more readily transferable. Additional implications of the theory are verified empirically by constructing a proxy variable for land tenure security and studying the differences between markets for unregistered land across Indonesian provinces. Regional land market activity is appropriately linked to the distribution of the proxy variable.