My research

Publications

Many countries shift substantial public resources across jurisdictions to mitigate spatial economic disparities. We use a general equilibrium model with multiple asymmetric regions, labor mobility, and costly trade to carve out the aggregate implications of fiscal transfers. Calibrating the model for Germany, we find that transfers indeed deliver smaller disparities across regions. This comes at the cost of lower national output, however, because economic activity is diverted away from core cities and towards remote areas with low productivity. But despite this loss in output per capita by about 2% in our baseline specification, welfare still increases by 0.07% because the transfer scheme countervails over-congestion in large cities. If the optimal transfer regime was implemented, welfare would increase by 0.06%. 


We use a quantitative model to study the implications of European integration for welfare and net migration flows across 1,280 European regions. The model suggests that an increase of trade barriers to the level of 1957 reduces welfare by about 5%–8% on average, depending on the presumed trade elasticity. However, remote regions may face initial welfare losses of up to 10%. These heterogeneous welfare effects cause estimated net migration of 1.9% of the population to the European geographic center implying that the dismantling of trade barriers in Europe has led to a more homogeneous spatial distribution of economic activity. With regard to the Brexit, we find moderate welfare losses for the United Kingdom of 1.05% in the most pessimistic scenario while continental Europe's welfare declines by 0.41%.

Working Papers

We provide new empirical and theoretical evidence on the spatial consequences of public policies driven by electoral motives. Using  exogenous variation in the timing of natural disasters, we show that hurricanes occurring close to Election Day in the United States lead to increased local post-disaster efforts. These electorally motivated measures lead populations to sort into hazard-prone areas. To comprehend the aggregate implications of this sorting pattern, we introduce the relationship between electoral cycles and public policies in a spatial equilibrium model. These electorally motivated policies generate considerable productivity and output losses without being compensated by aggregate welfare gains.


We examine optimal spatial policies in a model where these policies influence workers' decisions about employment, residence, and participation in the labour force. These decisions are made in the context of spatial externalities, such as agglomeration and congestion effects. We compare the market outcomes of this model with those of a welfare-maximising social planner. Our findings reveal significant differences between optimal spatial policies in our model and previous research that did not consider local labour force participation. These differences have implications for workers' sorting, labour supply, and welfare. Using German data, we quantify these effects and find that the optimal policy could increase the (female) labour force by approximately $3\%$ and improve aggregate welfare by $1.3\%$. If the labour supply margin is neglected, the level of fiscal redistribution across locations and GDP and welfare gains from implementing optimal spatial policies are underestimated.

Older Working Papers

Regional governments often employ significant financial resources as investments in public goods at the local level. Apart from affecting the attractiveness of their jurisdiction, local fiscal expenditure also has the potential to stimulate local employment via "fiscal multipliers". We exploit exogenous variation in the size of public funds and interregional fiscal transfers to estimate the size of these local employment shifters. To assess the aggregate effects of local budget shocks on employment and regional sorting, we use these multipliers as input into a spatial general equilibrium model with multiple types of workers. In our model, workers are differently affected by local fiscal budgets and local public goods provision in their labor supply decisions. Counterfactual simulations suggest that the inclusion of local labor supply responses as an additional adjustment channel leads to distinct quantitative and qualitative effects on aggregate welfare and productivity in a spatial model with worker mobility.

 

We discuss the role of key regions in spatial development. Local productivity shocks can affect the entire economy as they expand via tight connections in the domestic production network and influence the geographical allocation of labor. In particular, we identify the set of key regions with the highest potential to affect aggregate productivity, output, and welfare. Key regions are central locations with strong spatial linkages in the production network but are not too large and congested so they can still attract additional labor in response to positive productivity shocks without local rents and input costs rising too much. Using a spatial equilibrium model and data from German districts, we find that a relatively modest development of productivity in key regions lowered German output and welfare growth by a factor of two from 2010 to 2015.

Work in Progress