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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ECON280D Lecture 7: Spatial Policies Cecile Gaubert U.C. Berkeley April 4, 2019 ECON280D. Spring 2019. C. Gaubert Lecture 7 Spatial Policies 1 / 41
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Motivation I Spatial concentration of economic activity leads to spillovers I Agglomeration externalities; congestion disamenities I Shapes concentration of activity and wage differences between cities I Heterogeneity in spillover and spatial sorting I Spillovers vary across different types of workers (e.g. by skill) I Shapes spatial sorting and wage inequality in large high-wage cities I Governments routinely shape the spatial distribution through policies I Place-based policies I Taxes and transfers I Research questions I Is the observed spatial allocation inefficient? I What policies (taxes and transfers) would restore efficiency? I Are spatial income disparities and sorting too strong? ECON280D. Spring 2019. C. Gaubert Lecture 7 Spatial Policies 2 / 41
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Optimal Spatial Policies, Geography and Sorting 1. Economic geography model with worker sorting and spillovers : I Quantitative geography model: Allen and Arkolakis (2014)-Redding (2016) I Labor mobility I Geographic frictions (bilateral trade costs) I City-level spillovers in amenities and productivity I Location model with labor heterogeneity: Diamond (2016) I Imperfectly substitutable skills I Asymmetric spillovers across types (skills) I Spatial sorting by skill I Key generalization: general transfers across regions and workers ECON280D. Spring 2019. C. Gaubert Lecture 7 Spatial Policies 3 / 41
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Optimal Spatial Policies, Geography and Sorting 2. Characterization of optimal allocation and optimal spatial transfers I One skill group + constant elasticities : I Optimal “place-based” policy is independent from space I Multiple skill groups: place-based policies needed for efficient sorting I Decentralized sorting may be too strong under positive cross-spillovers 3. Quantification on U.S. data across MSAs under existing spillover estimates I Stronger redistribution to low wage cities I Weaker spatial sorting by skill, lower wage inequality in larger cities I Significant welfare gains ECON280D. Spring 2019. C. Gaubert Lecture 7 Spatial Policies 4 / 41
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Optimal Spatial Policies, Geography and Sorting 2. Characterization of optimal allocation and optimal spatial transfers I One skill group + constant elasticities : I Optimal “place-based” policy is independent from space I Multiple skill groups: place-based policies needed for efficient sorting I Decentralized sorting may be too strong under positive cross-spillovers 3. Quantification on U.S. data across MSAs under existing spillover estimates I Stronger redistribution to low wage cities I Weaker spatial sorting by skill, lower wage inequality in larger cities I Significant welfare gains ECON280D. Spring 2019. C. Gaubert Lecture 7 Spatial Policies 4 / 41
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Preferences I j 1 , ..., N city sites, θ Θ worker types I free mobility I L θ j : population of type- θ workers in city j I Utility of a type- θ worker in city j : u θ j = U ( c θ j , h θ j ) a θ j ( L 1 j , .., L Θ j ) I U ( c θ j , h θ j )
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  • Spring '19
  • Cecile Gaubert

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