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The Impacts of Spatial Policy

Paper Session

Friday, Jan. 4, 2019 10:15 AM - 12:15 PM

Atlanta Marriott Marquis, L503
Hosted By: Econometric Society
  • Chair: Cecile Gaubert, University of California-Berkeley

Optimal Spatial Policies, Geography and Sorting

Pablo Fajgelbaum
,
University of California-Los Angeles
Cecile Gaubert
,
University of California-Berkeley

Abstract

TBD

A Quantitative Analysis of Subsidy Competition in the United States

Ralph Ossa
,
University of Zurich

Abstract

I use a quantitative economic geography model to explore subsidy competition among U.S. states. I ask what motivates state governments to subsidize firm relocations and quantify how strong their incentives are. I also characterize fully non-cooperative and cooperative subsidy choices and assess how far away we are from these extremes. I find that states have strong incentives to subsidize firm relocations in order to gain at the expense of other states. I also find that observed subsidies are closer to cooperative than non-cooperative subsidies but the potential losses from an escalation of subsidy competition are large.

House Prices, Migration, and the Evolution of the Wealth Distribution

Ferdinando Monte
,
Georgetown University
Esteban Rossi-Hansberg
,
Princeton University

Abstract

TBD

Skill, Agglomeration, and Inequality in the Spatial Economy

Farid Farrokhi
,
Purdue University

Abstract

This paper develops a spatial equilibrium model with skill heterogeneity and endogenous agglomeration to study distributional welfare consequences of spatial policies. I show empirically that the relationship between log worker productivity and log city population is nonlinear in city size and in worker's skill. The model predicts these nonlinearities through local idea exchange between workers. I structurally estimate the model to match US Census employment and wage data, and use the estimates for decomposition and counterfactual exercises. A policy, with zero aggregate welfare effect, that favors smaller cities at the expense of larger cities, would notably reduce welfare inequality.

Commuting, Labor and Housing Market Effects of Mass Transportation: Welfare and Identification

Christopher Severen
,
Federal Reserve Bank of Philadelphia

Abstract

Using a panel of tract-level bilateral commuting flows, I estimate the causal effect of Los Angeles Metro Rail on commuting between connected locations. This unique data, in conjunction with a spatial general equilibrium model, isolates commuting benefits from other channels. A novel strategy interacts local innovations with intraurban geography to identify all model parameters (local housing and labor elasticities). Metro Rail connections increase commuting between locations containing (adjacent to) stations by 15% (10%), relative to control routes selected using proposed and historical rail networks. Other margins are not affected. Elasticity estimates suggest relatively inelastic mobility and housing supply. Metro Rail increases welfare $146 million annually by 2000, less than both operational subsidies and the annual cost of capital. More recent data show some additional commuting growth.
JEL Classifications
  • F1 - Trade
  • R1 - General Regional Economics