Job Market Paper
I investigate the extent to which land-use restrictions, through their impact on house prices, act as a barrier to labor mobility. To do so, I develop a multi-region heterogeneous agents model of migration and housing, where land-use restrictions act as a friction affecting the productivity of land and the housing supply. Using the structure of the model, along with data on regional prices, output, and housing densities, I estimate a measure of implied restrictions across a panel of U.S. states. Consistent with the existing measure of restrictions, the model-implied measure suggests that restrictions are most stringent in regions with high incomes and house prices. Further, the measure shows that the states that were most restricted in the past have become even more restrictive over time. I calibrate the model to 2014 and show that the variation in regional productivities and land-use restrictions generate the income and house price gaps observed in the data. Performing a counterfactual exercise, I find that lowering the level of restrictions in California back to its level in 2000 results in a large reallocation of labor. The state's population rises by 45%, while the income gap and house value gap between California and the rest of the U.S. falls by 3.7% and 2.7%, respectively. I also study the importance of borrowing constraints and moving costs in hindering labor mobility and find that conditional on the observed income and house price gaps, neither plays a significant role.
Work in progress
The Aggregate Implications of Uncertainty
The level of uncertainty in the economy varies significantly over time and, as has been well documented, there is a clear counter-cyclical relationship between the business cycle and uncertainty. This paper seeks to better understand this evident relationship. To do so, I develop a heterogeneous-firm general equilibrium model where monopolistically competitive firms face idiosyncratic productivity shocks, make risky input choices, and face default risk. Using this framework, I highlight an important channel by which uncertainty, through the probability of default, affects the cost of borrowing and risk associated with contracting labor. Solving for the steady-state of the model at varying levels of uncertainty, I find that higher uncertainty is associated with lower wages, through a decrease in the demand for labor, a lower interest rate, through an increased incentive to save, and interestingly an increase in aggregate output.