Lecture7_spatial_policies_2019.pdf - ECON280D Lecture 7 Spatial Policies Cecile Gaubert U.C Berkeley April 4 2019 ECON280D Spring 2019 C Gaubert Lecture

Lecture7_spatial_policies_2019.pdf - ECON280D Lecture 7...

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ECON280DLecture 7:Spatial PoliciesCecile GaubertU.C. BerkeleyApril 4, 2019ECON280D. Spring 2019. C. GaubertLecture 7Spatial Policies1 / 41
MotivationISpatial concentration of economic activity leads to spilloversIAgglomeration externalities; congestion disamenitiesIShapes concentration of activity and wage differences between citiesIHeterogeneity in spillover and spatial sortingISpillovers vary across different types of workers (e.g. by skill)IShapes spatial sorting and wage inequality in large high-wage citiesIGovernments routinely shape the spatial distribution through policiesIPlace-based policiesITaxes and transfersIResearch questionsIIs the observed spatial allocation inefficient?IWhat policies (taxes and transfers) would restore efficiency?IAre spatial income disparities and sorting too strong?ECON280D. Spring 2019. C. GaubertLecture 7Spatial Policies2 / 41
Optimal Spatial Policies, Geography and Sorting1. Economic geography model with worker sorting and spillovers:IQuantitative geography model:Allen and Arkolakis (2014)-Redding (2016)ILabor mobilityIGeographic frictions (bilateral trade costs)ICity-level spillovers in amenities and productivityILocation model with labor heterogeneity:Diamond (2016)IImperfectly substitutable skillsIAsymmetric spillovers across types (skills)ISpatial sorting by skillIKey generalization: general transfers across regions and workersECON280D. Spring 2019. C. GaubertLecture 7Spatial Policies3 / 41
Optimal Spatial Policies, Geography and Sorting2. Characterization of optimal allocation and optimal spatial transfersIOne skill group + constant elasticities :IOptimal “place-based” policy is independent from spaceIMultiple skill groups: place-based policies needed for efficient sortingIDecentralized sorting may be too strong under positive cross-spillovers3. Quantification on U.S. data across MSAs under existing spillover estimatesIStronger redistribution to low wage citiesIWeaker spatial sorting by skill, lower wage inequality in larger citiesISignificant welfare gainsECON280D. Spring 2019. C. GaubertLecture 7Spatial Policies4 / 41
Optimal Spatial Policies, Geography and Sorting2. Characterization of optimal allocation and optimal spatial transfersIOne skill group + constant elasticities :IOptimal “place-based” policy is independent from spaceIMultiple skill groups: place-based policies needed for efficient sortingIDecentralized sorting may be too strong under positive cross-spillovers3. Quantification on U.S. data across MSAs under existing spillover estimatesIStronger redistribution to low wage citiesIWeaker spatial sorting by skill, lower wage inequality in larger citiesISignificant welfare gainsECON280D. Spring 2019. C. GaubertLecture 7Spatial Policies4 / 41
PreferencesIj1, ...,Ncity sites,θΘ worker typesIfree mobilityILθj: population of type-θworkers in cityjIUtility of a type-θworker in cityj:uθj=U(cθj,hθj)aθj(L1j, ..,LΘj)IU(cθj,hθj)

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