Essays in local economics

This dissertation explores various topics in urban economics, labor economics and public economics. The first chapter studies why central city neighborhoods in America became gentrified in the recent few decades. In the past three decades, American central city neighborhoods have experienced an influx of high-income, highly skilled residents and an exodus of low-income, low-skilled residents. This gentrification of central city neighborhoods has reversed decades of decline in urban centers. In this chapter, I test the hypothesis that an important driving force behind gentrification is the rise in the value of highly skilled workers' time. To perform the test, I estimate a spatial equilibrium model of neighborhood choice. In the model, workers choose the neighborhood in which they live based on their value of time, commute times, rents, and amenities. I measure the differential growth in the value of time for each occupation by analyzing changes in the cross-sectional relationship between residual earnings and hours worked in Census data. My empirical strategy exploits the variation in the spatial distribution of jobs in different occupations. This allows me to separate the demand for shorter commute times from the demand for local amenities. I find that workers in occupations that experience greater growth in the value of time are more likely to locate in neighborhoods with shorter commute times. The initial shock to demand for central city housing by high-skilled workers creates endogenous amenity improvement in the affected neighborhoods, which furthers gentrification because additional high-skilled workers are attracted by the improved amenities. While the estimates of my model indicate that changes in the value of time are likely an important driving force behind gentrification, the effects are substantially magnified by endogenous amenity improvement. The estimates also imply that the welfare gap between high- and low-skilled workers (which takes into account not just earnings but also the value of time, rents, and amenities) has grown more than the earnings gap between high- and low-skilled workers. The second chapter studies the welfare implications of local consumption amenities. Assessing local benefits of consumption amenities is faced with two challenges. First, the benefits of consumption amenities (e.g. restaurants) are often spatially diffused. Evaluating the impact of consumption amenities on residents requires an understanding of how the benefits of amenity diffuse through distance. Second, evaluating how each type of amenity (e.g. restaurants vs. gyms vs. museums) differentially contribute to the overall welfare of residents is challenging due to identification problems. To address these challenges of spatial diffusion and aggregation, I construct and estimate a model of amenity choice and use the model framework to empirically evaluate the welfare implication of spatial distribution of consumption amenities. In the model, I allow agents at each location to choose bundles of visits to various types of consumption amenities and which amenity establishments to visit based on their taste for each type of amenities, degrees of substitutability between choices of amenity establishments, cost of visits and cost of travel. The features of the model microfound the varying rates of spatial diffusion of amenity benefits and the weights people put on each type of amenity with deep preference parameters. After estimating the model parameters using a combination of time use surveys and geocoded data of amenity establishments, I assess how changes in local consumption amenities can affect the welfare of local residents using this model. In the third chapter, I study how non-Asians and non-Hispanics' choices for ethnic products brands are affected by the increasing presence of Asians and Hispanic residents in the past decade. In the past few decades, the growth in Asian and Hispanic population significantly changes the ethnic composition of neighborhoods throughout the United States. I show that between 2004 and 2016, non-Asian's expenditure share on Asian brands increased by a large amount in a number of product groups. But non-Hispanics' expenditure shares on Hispanic brands generally remain stable, despite robust growth in Hispanic population. I explain this pattern by showing that Asian brand entries were much stronger than Hispanic brand entries. I also show that the rising expenditure share on Asian brands can be partially explained by consumers' increasing likelihood of visiting retailers that sell Asian brands.

Keywords: Economics.
Advisor: Pistaferri Luigi 
Diamond Rebecca (Of Stanford University. Graduate School of Business) 
Hoxby Caroline Minter