Working papersNewsday (February 11, 2018) and CBCNY (October 30, 2017). Nontechnical summary here.)
I analyze how competition between localities affects tax breaks and business location decisions. I first use a geographic instrument to show that spatial competition substantially increases firm-specific property tax breaks. I then use this pattern to estimate a model of localities competing for mobile firms by offering tax exemptions. In counterfactual exercises, restricting which levels of government can offer tax breaks has little effect on equilibrium business locations but lowers total exemptions by 30%. This suggests that local tax break competition primarily reduces taxes for mobile firms and is unlikely to substantially affect the efficiency of business location.
The Effect of New Luxury Housing on Regional Housing Affordability (email for draft)
I study the short-run effect of new luxury housing on the market for cheaper housing. I begin by identifying 57,000 households in 1,500 new luxury apartment buildings in large cities and tracing each to its previous residence. The previous neighborhoods have lower average income and rent than the neighborhoods around the new units, and this pattern continues when I iterate by identifying the households who moved into the units that the first cohort vacated. This suggests that new housing creates vacancies in lower-cost areas. To quantify this effect, I combine these estimates with a simple model to show that—under certain assumptions on counterfactual migration patterns—building 100 new luxury units generates the same gains for low-income households as building 29 units in Census tracts in the bottom three income quintiles.
Place-based policy could improve efficiency if it targets areas with large amenity or agglomeration externalities. We begin by using a Census-updating instrument to show that increased federal spending in a county and the associated economic stimulus have substantial amenity externalities on average. We then employ two machine learning algorithms to conduct a data-driven search for heterogeneity in this effect and find that it is meaningfully larger in economically struggling counties. This suggests heterogeneity in amenity externalities works in favor of policies targeting struggling areas and should be considered in evaluations of specific place-based programs.
Information frictions in markets for insurance affect not only the choices consumers make, but also the menu of plans insurers offer. We illustrate this observation using an information friction in Medicare Advantage — beneficiaries pay two premiums, and one is much more salient. We begin by estimating demand and finding a larger elasticity for the salient versus non-salient premium. Next, we show that a model of insurer plan design produces simulated premiums matching the observed distribution when accounting for differential salience, but not when assuming equal elasticities across the two premiums. Finally, we simulate how plan enrollment would change if the friction were removed. Consumer surplus increases by $73/year when allowing insurers to redesign their plans, versus only $5/year holding supply fixed.