Working Papers
Revise and Resubmit, Review of Economic Studies (2nd Round)
Economic growth has varied tremendously across regions of the United States over the past several decades. In this paper, I develop a dynamic quantitative spatial model to study the distributional implications of spatially heterogeneous shocks. The model incorporates two key mechanisms that link welfare to local economic conditions: migration costs and homeownership. I use the model to analyze the welfare effects of heterogeneous productivity shocks across U.S. cities. I find that local productivity shocks have important distributional consequences: on average, a 1% shock to local productivity raises residents’ welfare by 0.37%. The pass-through from a local productivity shock to welfare varies substantially by age and housing tenure. I show that homeownership plays a central role in spatial redistribution: in an otherwise similar model without homeownership, the average welfare effect of a 1% local productivity shock is just 0.03%. This is because house price changes counteract the welfare effects of wage changes for renters, but augment them for owners. These results suggest that accounting for homeownership is essential for understanding the distributional effects of spatially heterogeneous shocks.
Revise and Resubmit, American Economic Review (Resubmitted)
We develop a dynamic urban model that incorporates key elements of macro-housing models into an internal city structure with commuting. The model includes many locations, costly migration, forward-looking households, life cycle dynamics, income risk, homeownership choice, and housing frictions. Our solution method avoids the curse of dimensionality from commuting, efficiently computing steady states and transition dynamics. Using a model of San Francisco, we show that our dynamic framework produces qualitatively different welfare effects of local shocks and policies from traditional static models. Our results highlight the role of homeownership and explain why welfare-improving policies often face local opposition.
The Geography of Wealth: Shocks, Mobility, and Precautionary Savings (with Maximiliano Dvorkin)
Submitted
The spatial distribution of wealth in the United States is very heterogeneous. We study the spatial distribution of wealth in a country and how it is shaped by regional earning characteristics and mobility frictions. For this, we develop a tractable model of consumption,
savings, and location choice with many regions, incomplete markets, and heterogeneous agents facing persistent and transitory income shocks. Our theory extends a workhorse macroeconomic model of consumption and savings under uncertainty to an economy with multiple labor markets and costly mobility. Despite complex spatial and individual heterogeneity, we characterize the optimal consumption, savings, and mobility decisions of workers in closed form. Mobility frictions increase precautionary savings as workers hedge against consumption fluctuations generated by moving decisions. The spatial distribution of wealth is primarily driven by the interaction between persistent income shocks, saving behavior, and worker sorting over locations. Our results highlight the importance of accounting for worker mobility and regional heterogeneity in earnings dynamics when studying the spatial distribution of wealth.
Publications
Demand, Growth, and Deleveraging (with Conor Walsh).
Review of Economic Dynamics, 51 (2023): 795-812.
Review of Economic Dynamics, 51 (2023): 795-812.
We present empirical evidence that weak household demand contributed to a reduction in firm entry in the Great Recession. Motivated by this evidence, we study the general equilibrium response of aggregate economic growth to a severe deleveraging event. To do so, we combine a standard incomplete markets model with a frontier class of endogenous growth models. A large reduction in credit access causes the zero lower bound to bind, inducing a drop in demand via employment rationing. Decreased demand in turn lowers the return to entrepreneurship and innovation, endogenously lowering productivity. We find that a persistent recession induced by deleveraging can significantly influence growth in productivity. Our main result is a powerful feedback effect: households increase savings in response to future slow growth, exacerbate the fall in demand, and further slow the recovery.
Can Self-Help Groups Really be 'Self-Help'? (with Joseph Kaboski and Eva Van Leemput).
Review of Economic Studies, 83 (2016): 1614-1644. Appendix
Review of Economic Studies, 83 (2016): 1614-1644. Appendix
We provide an experimental and theoretical evaluation of a cost-reducing innovation in the delivery of “self-help group” microfinance services, in which privatized agents earn payments through membership fees for providing services. Under the status quo, agents are paid by an outside donor and offer members free services. In our multi-country randomized control trial we evaluate the change in this incentive scheme on agent behavior and performance, and on overall village-level outcomes. We find that privatized agents start groups, attract members, mobilize savings, and intermediate loans at similar levels after a year but at much lower costs to the NGO. At the village level, we find higher levels of borrowing, business-related savings, and investment in business. Examining mechanisms, we find that self-help groups serve more business-oriented clientele when facilitated by agents who face strong financial incentives.
Comments
Comment on Hsieh and Moretti (2019)
Conditionally Accepted, American Economic Journal: Macroeconomics
Selected Work in Progress
Work from Home and the Evolution of Cities (with Andrii Parkhomenko and Stijn Van Nieuwerburgh)
Land Use Regulation, Homeownership, and the Cost of NIMBYism (with Christian Hilber, Hans Koster, Gabriel Loumeau, and Andrii Parkhomenko)
Are We Consuming Too Much Groundwater? (with Joseph Shapiro and Katherine Wagner)