the deadweight loss from non neutral capital income taxation abstract this paper develops an overlapping generations general equilibrium model that treats explicitly the role of capital goods in the production process and uses the model to measure the relative magnitudes of different distortions associated with capital income taxation across industries assets and time one of the main results is that uniform capital income taxation is almost certainly suboptimal theoritically but that optimal deviations from uniform taxation are empirically inconsequencial the paper also introduces and applies a general technique for distinguishing intergenerational transfers from efficiency gains in the analysis of the impact of policy changes on long run welfare

the impact of rent control on tenure discounts and residential mobility it is widely believed that rent control leads to a decline in the quality of rental housing this study examines the effect of rent control on the quality of rental housing in new york city quality change is linked to the suppression of rent below

the effect of land use regulation on housing and land prices abstract this paper investigates the effects of land use regulation restrictiveness on house and vacant land prices in contrast to prior studies the index of restrictiveness is treated as an endogenous variable and estimated effects are allowed to vary by market setting using data on more than 100 florida cities greater regulation restrictiveness is found to increase house price and decrease land price evidence is also provided showing that more restrictiveness increases the size of newly constructed homes

the labor market impact of immigration a quasi experiment exploiting immigrant location rules in germany with the fall of the berlin wall ethnic germans living in eastern europe and the former soviet union were given the opportunity to migrate to germany within 15 years 2 8 million individuals had done so upon arrival these immigrants were exogenously allocated to different regions to ensure an even distribution across the country their inflow can therefore be seen as a quasi experiment of immigration i analyze the effect of these inflows on skill specific employment rates and wages the results indicate a displacement effect of 3 1 unemployed workers for every 10 immigrants that find a job but no effect on relative wages

economic growth in a cross section of cities abstract we examine the relationship between urban characteristics in 1960 and urban growth between 1960 and 1990 income and population growth move together and both types of growth are 1 positively related to initial schooling 2 negatively related to initial unemployment and 3 negatively related to the initial share of employment in manufacturing racial composition and segregation are uncorrelated with urban growth across all cities but in cities with large nonwhite communities segregation is positively correlated with population growth government expenditures except for sanitation are uncorrelated with growth government debt is positively correlated with later growth

rental housing markets the incidence and duration of vacancy and the natural vacancy rate abstract new intermetropolitan and time series data from the bls are used to derive and model the incidence and duration of rental vacancies and to assess their importance to the price adjustment mechanism for rental housing research findings indicate that duration varies with measures of msa housing costs and housing stock heterogeneity while incidence varies with measures of population mobility public housing availability and population growth results support a more general specification of rental price adjustment in which the rate of real rent change reflects deviations in observed vacancy incidence and duration from their equilibrium levels the research provides new estimates of equilibrium vacancy rates for a large set of metropolitan areas over the 1987 1996 period

housing market equilibrium almost without vacancies the swiss housing market is characterised by an extraordinarily low vacancy rate generally in the vicinity of 1 per cent is the swiss housing market permanently in a condition of severe shortage this paper uses both a standard non accelerating rent inflation rate of vacancy approach and a new perception based approach to answer this question the available evidence confirms that a vacancy rate of 1 1 5 per cent is indeed sufficient for the swiss housing market to be in equilibrium provided only dwellings that are not only unoccupied but also actually offered for rent or purchase are counted which makes this rate not easily comparable with other countries the standard equilibrium vacancy rate approach suggests that even lower rates are sufficient in more densely built places whereas the approach based on perceptions makes no difference this suggests that the dwellings listed by people who wish to move reduce the pressure on rents but not the feeling of housing shortage

are private markets and filtering a viable source of low income housing estimates from a repeat income model while filtering has long been considered the primary mechanism by which markets supply low income housing direct estimates of that process have been absent this has contributed to doubts about the viability of markets and to misplaced policy i fill this gap by estimating a repeat income model using 1985 2011 panel data real annual filtering rates are faster for rental housing 2 5 percent than owner occupied 0 5 percent vary inversely with the income elasticity of demand and house price inflation and are sensitive to tenure transitions as homes age for most locations filtering is robust which lends support for housing voucher programs jel r21 r31 r38

international prices costs and markup differences relative cross border retail prices in a common currency comove closely with the nominal exchange rate using product level prices and wholesale costs from a grocery chain operating in the united states and canada we decompose this variation into relative costs and markup components the high correlation of nominal and real exchange rates is driven mainly by changes in relative costs national borders segment markets retail prices respond to changes in costs in neighboring stores within the same country but not across the border prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries jel f31 l11 l81

re evaluating the impact of immigration on the u s rental housing market abstract previous studies provide evidence that immigration increases housing prices and rents to deal with endogenous location choices of immigrants these studies often use a shift share instrumental variable approach this approach however fails to adequately account for the natural attraction of immigrants to cities with thriving economies high immigration cities provide more economic opportunities and thus exhibit persistently rising housing prices and rents this paper improves upon the traditional empirical approach by explicitly controlling for initial city characteristics that lead to both increases in immigration and the evolution of rents results suggest that after controlling for endogenous sorting of immigrants the positive effect of immigration on rents is attenuated while the impact of immigrant inflows is smaller an extension of the main results suggests the effects of immigration on rents remains larger than that of native inflows

immigration and housing rents in american cities is there a local economic impact of immigration immigration pushes up rents and housing values in us destination cities the positive association of rent growth and immigrant inflows is pervasive in time series for all metropolitan areas i use instrumental variables based on a shift share of national levels of immigration into metropolitan areas an immigration inflow equal to 1 of a city s population is associated with increases in average rents and housing values of about 1 the results suggest an economic impact that is an order of magnitude bigger than that found in labor markets

investment with uncertain tax policy does random tax policy discourage investment we consider the impact of tax policy uncertainty on firm level and aggregate investment comparing investment behaviour when uncertainty is due to a shock following geometric brownian motion gbm versus when random discrete jumps in tax policy occur expectations of the likelihood of a tax policy switch have an important negative impact on the gain to delaying investment in the latter model and time to investment can fall with increasing tax policy uncertainty aggregate investment simulations indicate that capital formation is adversely affected by increases in uncertainty in the traditional gbm model but can be enhanced in the jump process model

tax neutrality and the social discount rate a suggested framework abstract there are few problems in tax analysis which have generated as much study and discussion among economist as the question of how to formulate neutral tax incentives for investment yet no consensus has been reached concerning the proper approach to take when adjusting taxes comparing the two fundamental notions of neutrality found in the literature referred to here as present value rules and internal rate of return rules we argue that to the extent that neutrality is a useful concept only the latter of these approaches makes sense in terms of achievement of production efficiency

presidential address macroeconomics and online prices the availability of microeconomic pricing data has produced an empirical revolution in macroeconomics two events were the main culprits first national statistical offices allowed economists to study the data underlying the construction of the consumer price index cpi which gave our profession the chance to tackle many questions that have been open for decades second scanner data from several supermarkets and merchandising companies were made available as well offering another great opportunity for research the earlier literature used aggregate price indexes to address questions of price rigidity the law of one price cost and exchange rate passthrough international market segmentation and so on the aggregation and the procedures behind the construction of those indexes mask several economic phenomena the availability of more detailed data has allowed the profession to take a closer look at old questions 1the microeconomic cpi data has several advantages the first and most important is its representativeness statistical offices invest in the design of the data to make sure they include a representative set of prices for the consumption basket the second advantage is the long history when the microeconomic price data are released researchers generally have access to several years and sometimes decades this feature is quite important for evaluating pass through and relative price equilibrium deviations the disadvantages are many including the one indicated by alberto cavallo in his thesis microeconomic cpi prices are plagued with unit values 2 although unit values are conceivably a very good piece of information for the computation of inflation they are terrible for understanding price setting dynamics especially when evaluating price stickiness the second disadvantage is that even though the data are representative cpis tend to have very few items in each sector which means that the heterogeneity within sectors is disguised by small samples the scanner data resolved some of the issues in the cpi data and worsened others the scope was clearly much bigger and the extensive product variety allowed researchers to deal with heterogeneity much better in addition several scanner data sets have information on cost and quantities as well as on the prices which facilitates addressing questions on pass through the disadvantages however are several first scanner data are not representative the data characteristics vary greatly depending on the data provider the location and the time period when the data were collected databases available for research are usually from a single retailer which makes generalization even harder furthermore the quantity data captured by scanner data can be biased the reason is simple a supermarket that sells milk at an unusually low price will experience unusually large sales of milk using the quantities to determine aggregate implications produces a massive bias second scanner data also has unit values with prices reported as a ratio of sales over quantities and averaged over a week not all scanner data suffer from this problem but most of the data sets that have been used in the macroeconomic and international literature do observing the average price is not necessarily wrong if the question asked is about pass through or inflation it is however the incorrect data point when addressing questions of price stickiness and price dynamics 3alberto cavallo and i started the billion prices project at mit bpp almost a decade ago to explore how using web methods can improve the collection of prices 4 we use web scraping to download millions of prices every day from hundreds of retailers in more than seventy countries the purpose is to collect all the products sold by a store identify the posted prices every day and also detect information about sales promotions and the like in which case we collect all prices available there are some advantages and disadvantages to these data

production efficiency and the design of temporary investment incentives the attainment of production efficiency requires that tax incentives equalize pretax rates of return on different assets at each point in time to achieve this objective the conventional theory of investment tax credits itcs prescribes significantly lower credit rates on shorter lived assets however this result is valid only for permanent itcs we show that the credit rates for temporary itcs should be much closer to uniform than the conventional theory prescribes this result is robust to the presence and specification of adjustment costs

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

the effect of low skilled immigration on u s prices evidence from cpi data i exploit the large variation across u s cities and through time in the relative size of the low skilled immigrant population to estimate the causal effect of immigration on prices of nontraded goods and services using an instrumental variables strategy i find that at current immigration levels a 10 percent increase in the share of low skilled immigrants in the labor force decreases the price of immigrant intensive services such as housekeeping and gardening by 2 percent wage equations suggest that lower wages are a likely channel through which these effects take place however wage effects are significantly larger for low skilled immigrants than for low skilled natives implying that the two are imperfect substitutes

ethnic enclaves and the economic success of immigrants evidence from a natural experiment recent immigrants tend to locate in ethnic enclaves within metropolitan areas the economic consequence of living in such enclaves is still an unresolved issue we use an immigrant policy initiative in sweden when government authorities distributed refugee immigrants across locales in a way that may be considered exogenous this policy initiative provides a unique natural experiment which allows us to estimate the causal effect on labor market outcomes of living in enclaves we find substantive evidence of sorting across locations when sorting is taken into account living in enclaves improves labor market outcomes for instance the earnings gain associated with a standard deviation increase in ethnic concentration is in the order of four to five percent

room in the kitchen for the melting pot immigration and rental prices this paper studies the response of housing markets to immigration shocks following card 1990 i examine the changes in rental prices in miami and three comparison groups after the mariel boatlift this exogenous immigration shock added an extra 9 to miami s renter population in 1980 i find that rents increased from 8 to 11 more in miami than in the comparison groups between 1979 and 1981 by 1983 the rent differential was still 7 rental units of higher quality were not affected by the immigration shock units occupied by low income hispanic residents in 1979 experienced an extra 8 differential hike with respect to other low income units relative housing prices moved in the opposite direction from rents in the short run

state dependent or time dependent pricing does it matter for recent u s inflation in the 1988 2004 micro data collected by the u s bureau of labor statistics for the cpi price changes are frequent every 4 7 months depending on the treatment of sale prices and large in absolute value on the order of 10 the size and timing of price changes varies considerably for a given item but the size and probability of a price change are unrelated to the time since the last price change movements in aggregate inflation reflect movements in the size of price changes rather than the fraction of items changing price due to offsetting movements in the fraction of price increases and decreases neither leading time dependent models taylor or calvo nor 1 st generation state dependent models match all of these facts some 2 nd generation state dependent models however appear broadly consistent with the empirical patterns

the interruption of income convergence and income growth in large cities in the 1980s recent studies have documented the divergence of per capita personal income among regions of the us in the 1980s following many decades of income convergence this paper establishes the same patter

natural office vacancy rates some additional estimates excerpt in our recent paper shilling et al 2 we examined the rent adjustment process for 17 u s office markets and provided the first estimates of the natural vacancy rates in his comment voith 3 argues that our specification of the rent vacancy relationship is biased since we introduced an interaction term to capture the effect of risks associated with higher vacancy levels he suggests that an alternative specification would be to enter a vacancy squared term to capture this risk effect

why are population flows so persistent abstract a neoclassical model of local growth is developed by integrating the static equilibrium underlying compensating differential theory as the steady state of a neoclassical growth model numerical results show that even very small frictions to labor and capital mobility along with small changes in local productivity or local quality of life suffice to cause highly persistent population flows wages and house prices in contrast jump most of the way to their new steady state the model suggests that cross sectional regressions of local population growth can help to identify past and present changes in the determinants of representative agent welfare more generally it provides a framework for interpreting observed local growth rates

housing vacancy and rental adjustment evidence from hong kong the traditional rental adjustment equation is flawed in that the equilibrium paths for the adjustment of rents and vacancy rates cannot hold simultaneously over time this paper suggests a two equation model of rental adjustments based on adaptive expectations rather than the single equation model presented in the traditional literature and provides empirical tests annual data from the housing market in hong kong during the 1980 96 period are consistent with the adjustment equation the results also show that the rate of change of real rents is neutral with respect to inflation

the effects of colleges and universities on local labor markets there is little systematic evidence documenting a relationship between colleges and universities and local economies using census data for 218 smsas this paper examines the relationship between various measures of university quality and local labor market conditions the authors find that area employment growth rates and the percentage of the work force employed as scientists and engineers are positively and significantly related to measures of university quality however the data can not reject the hypothesis that university quality has no significant effect on area income the employment rate net migration rates or even the share of employment in high tech industries copyright 1993 by mit press

tax reform and adjustment costs the impact on investment and market value this paper provides an effective tax rate measure that is valid in the presence of adjustment costs and anticipated tax changes and a measure of the impact of tax changes on market value that may be decomposed into the effects on discounted pure profits and normal returns to capital changes in the value of capital may in turn be decomposed further into changes in the marginal value of new capital and changes in the relative value of new and existing capital these new measures are used to evaluate tax changes similar to those introduced by the recent u s tax reform copyright 1989 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

taxation corporate financial policy and the cost of capital the cost of capital plays an important role in the allocation of resources among competing uses in a decentralized market system the purpose of this paper is to organize and present what is known and what is hypothesized about the effects of taxation on the incentive to invest via the cost of capital taking full account of important issues that arise independently from the question of taxation included in the analysis is a discussion of empirical findings about the interaction of inflation and taxation in influencing the incentive to invest and a treatment of taxation and uncertainty this abstract was borrowed from another version of this item

investment tax incentives and frequent tax reforms despite the frequency of tax changes and their potential importance to investors almost all of the analysis of tax based investment incentives assumes investors never anticipate any tax changes we depart from this approach by analyzing the historical pattern of u s corporate investment incentives over the period 1953 86 incorporating the feature of investor awareness that the tax code may change our analysis incorporates a predictive equation for future tax variables into a model of optimal investment subject to adjustment costs and uncertainty we find that expectations of future tax changes significantly affect the incentive to invest only if adjustment costs are low in this case the incentive to invest in 1986 was strong as investors are estimated to have anticipated the coming reduction in investment incentives this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

accounting for u s real exchange rate changes this study measures the proportion of u s real exchange rate movements that can be accounted for by movements in the relative prices of nontraded goods the decomposition is done at all possible h

speed of adjustment in commercial real estate markets the 1980s were less than favorable to the u s real estate industry vast amounts of overbuilding occurred in most areas and in most property types commercial vacancy rates increased dramatically and rents fell both in nominal and real terms untoward events tax laws changes deregulation of financial institutions and a real estate depression in many areas of the country virtually halted speculative development and caused a freefall in real estate prices real estate credit markets were crippled by the decade long crisis in the sl 6 21 adjustment speeds are important for understanding future effects of real estate price changes and for interpreting recent events the higher the adjustment speed the greater the fraction of long run adjustment experienced so far the smaller the adjustments still to be expected and the lower the implied long run demand elasticity adjustment speeds also have important implications for macroeconomic policy there is reason to believe for example that the slow economic growth in the u s during the four years of the bush administration was attributable in large part to the massive overbuilding that occurred in commercial property markets during the 1980s and the relatively slow process by which unemployed resources have been absorbed into productive new endeavors 16 in what follows we propose and test a stock adjustment model of real estate investment the

scraped data and sticky prices i use daily prices collected from online retailers in five countries to study the impact of measurement bias on three common price stickiness statistics relative to previous results i find that o

the price adjustment process for rental housing and the natural vacancy rate institute of a university of ii business and california economic research berkeley center for real estate and urban economics working paper series working paper 82 53 the price adjustment process for rental housing and the natural vacancy rate by kenneth t rosen lawrence b smith these ers are preliminary in natu heir purpose 39 to stimulate discussion comm therefore t are n ted or q d in any pub on wit the express permissi the author graduate school of business administration