Working Papers

7. “Neighborhoods to Nations via Social Interactions.” October 26, 2014. PDF Forthcoming, Economic Modelling.

Abstract. The paper examines decisions by individuals and firms in the presence of social interactions and then turns to cities as the units of analysis of an urban economy.  Of particular interest of the city-based analysis is the critical role of intercity trade and its impact on urban sectoral and functional specialization. The paper takes up the single empirical fact about city sizes throughout the world that has generated interest much beyond economics,  Zipf’s law, and examines its relationship to long-run economic growth in economies made up of cities. The paper is not meant as an exhaustive review of the literature. Hopefully, Ioannides, From Neighborhoods to Nations via Social Interactions,  (Princeton U.P.: 2013) does that and more (up till the time it went to press). Instead, it is meant to highlight central issues in the broad literature, taking off from key concepts, as presented in Ioannides (2013) and drawing attention to key recent  contributions by other researchers.

6. “Walled Cities in Late Imperial China.” With Junfu Zhang, November 2, 2014 PDF

Abstract. For thousands of years, the Chinese and many other nations around the world built defensive walls around their cities. This phenomenon is not well understood from an economic perspective. To rationalize the existence of city walls, we propose a simple model that relates the dimensions of city walls to a set of economic variables. Guided by this model, we conduct an empirical analysis using hand-collected and previously unused data on city walls in the Ming (1368-1644) and Qing (1644-1911) Dynasties. Consistent with the model, we find that the circumference of a city wall is positively correlated with population size in the jurisdiction and that frontier cities subject to a higher probability of attack tended to have stronger city walls. Since a city wall imposes a physical boundary around a city, the land area inside the city wall provides a natural proxy of city size. We examine the physical size distribution of walled cities in late imperial China. We find that city sizes above a certain cutoff follow Zipf’s law, although the Zipf coefficient is sensitive to the choice of the cutoff point. This result complements findings in the existing literature that focuses almost exclusively on the population size distribution of cities.

5. “Thinking about Corruption in Greece.” with Costas Azariadis. May 24, 2014. PDFTechnical Appendix

Abstract. The paper addresses the issue of corruption, which appears to be endemic in Greece. It reviews the facts about corruption as a multifaceted phenomenon and its close relationship to tax evasion, by comparing Greece to its EU partners as well internationally. It addresses corruption as an instance of anti-social behavior by means of a number of simple metaphors that allow reliance on powerful tools of modern social interactions and property rights literatures. It emphasizes that whereas tepid enforcement might reduce somewhat corruption and other instances of anti-social behavior, drastic enforcement is required to move an economy and society to qualitatively different levels of such practices. The paper reviews different EU proposals regarding enforcement mechanisms and proposes three key constitutional amendments that are required to allow long-delayed reforms to take hold in Greece.

4. “Large versus Small States in The Eurozone, The Democratic Defi cit, and Future Architecture.”  December 16, 2013. Text Slides 

Abstract.  The Eurozone (EZ) is at a crossroads. The global financial crisis revealed the importance of the dearth of macro policy tools available to members of the European monetary union. This is in stark contrast to US. A critical issue, taken up by this paper is the limits to monetary policy tools in the absence of a fiscal union. This is the case for the Eurozone, in sharp contrast to the US fiscal union. The paper reviews the differences in various macro policy parameters between the US and the Eurozone. It then develops a stylized model of a fiscal union within a monetary union and examines broad policy options and advantages that adding a fiscal union confers on a monetary union.

3. “Urban Business Cycles through a DMP Lens: The Steady State Case.” February 2012 (under revision)

Abstract.The paper presents a model of the urban economy where in each city two types of tradeable intermediate varieties are used to produce a non-tradeable consumption good. Each city has a spatial structure, individuals commute to the CBD in order to work, when employed, and to seek jobs, when unemployed. The paper uses a Mortensen–Pissarides model of frictions in the labor market with a matching mechanism that may require travel to the CBD for face to face contacts. The urban structure consists of specialized, where only one type of intermediate varieties is produced, and diversified cities, where both types are produced, and there is intercity trade in intermediate varieties. The paper examines the impact of productivity shocks, of shocks to the matching process and of differences in the rate of job destruction, in particular, on  unemployment, output and welfare across the economy along a steady state. The impacts of shocks may be direct as well as indirect through the  relative prices of the two varieties. A natural dependence of unemployment on city size may be generated. The paper lays the ground work  for empirical investigations with data on unemployment rates, vacancy rates, and GDP for US metro areas, but empirical results will await a more advanced version of the paper. The paper is extended to the case of non-centralized methods of search, like via referrals from friends and co-workers.

2. “Searching for the Best Neighborhood: Mobility and Social Interactions,” with Giulio Zanella, April 2008. pdf Under revision.

Abstract.  The paper seeks to contribute to the social interactions literature by exploiting data on individuals’ self-selection into neighborhoods. We study a model in which households search for the best location in the presence of neighborhood effects in the formation of children’s human capital and in the process of cultural transmission. We use micro data from the PSID which we have merged, using geocodes, with contextual information at the levels of census tracts and of counties from the 2000 US Census. We control for numerous individual characteristics and neighborhood attributes and find, consistently with neighborhood effects models, that households with children, but not those without, are more likely to move out of neighborhoods whose attributes are not favorable to the production of human capital and the transmission of parents’ cultural traits, and to move into neighborhoods which instead exhibit desirable such attributes.

1. “Random Graphs and Social Networks: An Economics Perspective,” June 2004 pdf Abstract. This review of current research on networks emphasizes three strands of the literature on social networks. The first strand is composed of models of endogenous network formation from both the economics and the computer science literature. The review highlights the sensitive dependence of the topology of endogenous networks on parameters of the behavioral models employed. The second strand draws from the recent econophysics literature in order to review the recent revival of interest in the random graph theory. This mathematical tool allows one to study social networks that result from uncoordinated random action of individuals in setting up connections with others. The review explores a number of examples to assess the potential of recent research on random graphs with arbitrary degree distributions in accommodating more general behavioral motivations for social network formation. The third strand focuses on a specific model of social networks, Markov random graphs,  that is quite central in the mathematical sociology and spatial statistics literatures but little known outside those literatures. These are random graphs where the events that different edges are present are dependent, if edges are incident to the same node, and   independent, otherwise. The paper assesses the potential for economic applications with this particular tool. The paper concludes with an assessment  of observable consequences of optimizing behavior in networks for the purpose of estimation.