Research

SELECTED WORKING PAPERS:

Decentralized School Finance and Metropolitan Suburbanization

The residential patterns across the metropolitan areas have changed notably since 1950s; The population has suburbanized and the poor now live closer to the city center. The recent research by urban economists finds that the income elasticity of land demand is too low to explain the poor's urbanization, which mainly comes from better access to public transportation in cities. We take the new findings seriously and develop a new hybrid Tiebout-Alonso model by explicitly introducing (i) a public transportation as an alternative mode of commute to automobile, and (ii) a housing production function that allows us to work with the income elasticity of land demand directly. We later extend the model in several other directions, including an extended model with a decentralized employment centers. Our model finds that the neighborhood amenities (i.e education and property taxes) have substantial effect on the residential patterns across metropolitan areas that cannot be ignored, and produces some testable predictions.

On the Importance of Fertility Behavior in School Finance Policy Design

Wealthy parents invest more resources in their children, while lower-income families, which are more likely to have more children, are highly stretched for resources. As a result, an achievement gap between rich and poor children exists, a development that threatens to dilute education's leveling effects. We develop a dynamic general equilibrium in which parents choose the quantity of children, genetically transfer an innate ability to their children, determine the quality of children by choosing private expenditures on basic education in addition to public expenditures on basic education, leave a bequest that could be used to finance college education. Moreover, there is an uncertainty in college completion depending on ability and endogenous wage determination based on the amount of schooling in the economy. It is very important to consider general equilibrium effects because the change in either fertility behavior or college outcomes as a result of policy changes leads to a large change in aggregate skill distribution. We find that ignoring fertility behavior, especially differential fertility substantially underestimates the role of credit constraints in the economy. We also analyze the impact of basic education subsidies and college subsidies on welfare, inequality, and intergenerational mobility. Strikingly, the choice between these two policies is found to be dependent on the magnitude of differential fertility rate.