Essays on the Economics of Space

These essays contribute towards our understanding of the economics of space. This dissertation is composed of three chapters.Chapter one—Is the rent too high? Aggregate implications of local land- use regulation: Highly productive U.S. cities are characterized by high housing prices, low housing stock growth, and restrictive land-use regulations (e.g., San Francisco). While new residents would benefit from housing stock growth due to higher incomes or shorter commutes, existing residents justify strict local land-use regulations on the grounds of congestion and other costs of further development. This paper assesses the welfare implications of these local regulations for income, congestion, and urban sprawl within a general equilibrium model with endogenous regulation. In the model, households choose from locations that vary exogenously by productivity and endogenously according to local externalities of congestion and sharing. Existing residents address these externalities by voting for regulations that limit local housing density. In equilibrium, these regulations bind and house prices compensate for differences across locations. Relative to the planner's optimum, the decentralized model generates spatial misallocation whereby high-productivity locations are settled at too-low densities. The model admits a straightforward calibration based on observed population density, expenditure shares on consumption and local services, and local incomes. Welfare and GDP would be 1.4% and 2.1% higher, respectively, under the planner??Ễs allocation. Abolishing zoning regulations entirely would increase GDP by 6%, but lower welfare by 5.9% due to greater congestion.Chapter two—The impact of emerging climate risks on urban real estate price dynamics: In the typical asset market, an asset featuring uninsurable idiosyn- cratic risk must offer a higher rate of return to compensate risk-averse investors. A home offers a standard asset’s risk and return opportunities, but it also bundles access to its city’s amenities??Ẻand to its climate risks. As climate change research reveals the true nature of these risks, how does the equilibrium real estate pricing gradient change when households can sort into different cities? When the population is homogeneous, the real estate pricing gradient instantly reflects the “new news”. With population heterogene- ity, an event study research design will underestimate the valuation of climate risk for households in low-risk cities while overestimating the valuation of households in high-risk areas.Chapter three—Entrepreneurship, Information, and Growth: We examine the contribution to economic growth of entrepreneurial marketplace information within a regional endogenous growth framework. Entrepreneurs are posited to provide an input to economic growth through the information revealed by their successes and failures. We empirically identify this information source with the regional variation in establishment births and deaths. To account for the potential endogeneity caused by forward-looking entrepreneurs, we utilize instruments based on historic mining activity. We find that the information spillover component of local establishment birth and death rates have significant positive effects on subsequent entrepreneurship and employment growth for U.S. counties and metropolitan areas. A version of this article was previously published in the Journal of Regional Science as Bunten et al. (2015)

Entrepreneurship, information, and economic growth

2010 Fall.Includes bibliographical references.This thesis analyzes the impact of entrepreneurship on economic growth across US cities within a formal production function approach. Like previous analyses of economic growth--but unlike many studies of entrepreneurship--economic growth is measured in personal income per worker. The production function features three traditional inputs with a novel fourth: entrepreneurial capital. Entrepreneurship is a process of information revelation which produces a dynamic externality providing marketplace information to potential future market entrants, outside firms, lenders and others. Entrepreneurial capital measures the contribution of this information to economic growth. Multiple measurements of entrepreneurial capital are used, each emphasizing different aspects of the entrepreneurial environment. The statistical results support the views that entrepreneurship is a causal input to local economic growth, that the effects of entrepreneurship are geographically localized, and that the thicker markets of large cities

Essays on the Economics of Space

These essays contribute towards our understanding of the economics of space. This dissertation is composed of three chapters.Chapter one—Is the rent too high? Aggregate implications of local land- use regulation: Highly productive U.S. cities are characterized by high housing prices, low housing stock growth, and restrictive land-use regulations (e.g., San Francisco). While new residents would benefit from housing stock growth due to higher incomes or shorter commutes, existing residents justify strict local land-use regulations on the grounds of congestion and other costs of further development. This paper assesses the welfare implications of these local regulations for income, congestion, and urban sprawl within a general equilibrium model with endogenous regulation. In the model, households choose from locations that vary exogenously by productivity and endogenously according to local externalities of congestion and sharing. Existing residents address these externalities by voting for regulations that limit local housing density. In equilibrium, these regulations bind and house prices compensate for differences across locations. Relative to the planner's optimum, the decentralized model generates spatial misallocation whereby high-productivity locations are settled at too-low densities. The model admits a straightforward calibration based on observed population density, expenditure shares on consumption and local services, and local incomes. Welfare and GDP would be 1.4% and 2.1% higher, respectively, under the planner??Ễs allocation. Abolishing zoning regulations entirely would increase GDP by 6%, but lower welfare by 5.9% due to greater congestion.Chapter two—The impact of emerging climate risks on urban real estate price dynamics: In the typical asset market, an asset featuring uninsurable idiosyn- cratic risk must offer a higher rate of return to compensate risk-averse investors. A home offers a standard asset’s risk and return opportunities, but it also bundles access to its city’s amenities??Ẻand to its climate risks. As climate change research reveals the true nature of these risks, how does the equilibrium real estate pricing gradient change when households can sort into different cities? When the population is homogeneous, the real estate pricing gradient instantly reflects the “new news”. With population heterogene- ity, an event study research design will underestimate the valuation of climate risk for households in low-risk cities while overestimating the valuation of households in high-risk areas.Chapter three—Entrepreneurship, Information, and Growth: We examine the contribution to economic growth of entrepreneurial marketplace information within a regional endogenous growth framework. Entrepreneurs are posited to provide an input to economic growth through the information revealed by their successes and failures. We empirically identify this information source with the regional variation in establishment births and deaths. To account for the potential endogeneity caused by forward-looking entrepreneurs, we utilize instruments based on historic mining activity. We find that the information spillover component of local establishment birth and death rates have significant positive effects on subsequent entrepreneurship and employment growth for U.S. counties and metropolitan areas. A version of this article was previously published in the Journal of Regional Science as Bunten et al. (2015)

People or Parking?

Car-based transportation networks (as in Phoenix) necessitate parking at origin and destination in order to establish a link—but the space devoted to parking lowers its ability to provide housing and consumer amenities. Walking and transit networks (as in Manhattan) have no such tradeoff, and a city reliant on them will be able to make fuller use of its land for productive purposes like amenities and housing. However, they hinder mobility in other ways: walking does not get you far, and using transit requires adhering to the routes and stops the city's transit agency provides. In this paper, we develop and calibrate a spatial consumer city model to study what would happen if Phoenix banned cars, delineating the roles of parking conversion, of the light rail network, and of a last mile option. Together with a last mile option, Phoenix's current light rail line would be able to sustain a meaningful (if smaller) population—but only if Phoenix converts its current parking to other uses. We then ask the reverse: what would happen if Manhattan required parking? The model indicates the island would essentially empty, as the declining capacity of each block lowers the vibrancy of the city, inducing still more residents to leave. Altogether, these model outcomes tell a story of agglomeration through complementarities. The transportation network and incumbent land use must ensure a high degree of access to jobs and amenities in order for enough people to choose to live in the city and thereby support those amenities

The Effect of Racial Composition on Neighborhood Housing Prices: Evidence from Hurricane Katrina-Induced Migration

National Science Foundation (NSF