13. “Searching for the Best Location: Neighborhood Effects and Neighborhood Choice.” With Giulio Zanella (University of Bologna). Presented at Search in Housing Markets Conference. Organizers: Espen R. Moen and Rachel Ngai. Imperial College, London, and Society for the Advancement of Economic Theory. June 5-6, 2024. PDF
Abstract. Self-selection into residential locations hampers identification of neighborhood effects. It is also an opportunity because neighborhood choices reveal preferences for the behavior and characteristics of neighbors and neighborhoods. We explore these features by means of a model in which households search, subject to search frictions, for the best location in the presence of neighborhood effects in children’s education and transmission of parents’ cultural identity.
The ensuing relation between mobility rates and contextual characteristics is tested using geocoded micro data from the PSID, merged with contextual information from the US Census. We find, consistently with neighborhood effects theories, that households with children, but not those without, tend to leave neighborhoods whose social attributes do not favor offspring’s human capital and to move into neighborhoods which instead exhibit desirable such attributes.
This human capital motive appears to dominate the cultural transmission one.
12. “Housing and Inequality.” With L. Rachel Ngai. Rev. May 23, 2024. PDF
Abstract. We approach the literature on housing and inequality from two angles. One is the impact of inequality in endowments on that of housing consumption and wealth. A second is the associational (or memberships) inequality associated with neighborhoods, that is households’ location both in physical jointly with social space. The review elaborates on those two dimensions of inequality. We focus on three distinctive features of housing: consumption, location and capital. For owner-occupants consumption and capital are bundled together in a single good. For both renters and owner-occupants, housing consumption, access to good neighborhoods and housing wealth follow from endowments inequality. Housing is a propagation mechanism for inequality through the location-specific returns to human capital investment and for owner-occupants the ability to use housing as collateral to finance investments. The paper uses this approach to analyse key aspects of housing and inequality and pays special attention to the impacts of racial discrimination and segregation. Earlier version Presented at CEPR Conference. Programme: Monetary and Economic Fluctuations. “Macroeconomic Policy in Times of Turmoil.” Aegina. 2023.
11. “Songlines.” With Sotiris Kampanelis and Aldo Elizalde. September 16, 2023. PDF Slides SSRN.Com
Abstract. This paper examines the long-term economic impacts of the adoption of local knowledge during European colonisation. We use the case of Australia, where Aboriginal knowledge of the landscape was integral to colonial exploration and settlement. To quantify the effects of this knowledge, we construct a newly digitised and georeferenced dataset of trade routes created by Aboriginal people based on oral traditions, known as Songlines. Our results indicate that Aboriginal trade routes are strongly associated with current economic activity as measured by nighttime satellite imagery and, alternatively, population density. We attribute this association to path dependence and agglomeration effects that emanate from the transport infrastructure built by Europeans roughly along these routes, which have agglomerated economic activity. Finally, by exploiting exogenous variation in optimal travel routes, we provide evidence that our results are not entirely determined by the inherent characteristics of Australian topography, but rather by Aboriginal knowledge.}
Earlier title: “How Local Knowledge Fueled Colonial Settlement and Long-Run Economic Activity: Evidence from Australia.”
10. “Asymmetric Trading Costs and Ancient Greek Cities.” With Yuxian Chen and Ferdinand Rauch. Rev. Aug. 30, 2023. PDF. CEPR D.P.17204. SSRN
Abstract. Asymmetric transport costs arise when shipping times from point i to point j differ from shipping from point j to i. We show that such asymmetric transport costs predict distinct patterns of location in a class of models using Dixit-Stiglitz preferences. We then study factors affecting the location of cities in ancient Hellas. Prevailing winds create an environment of asymmetric trade costs in ancient Greece. We show that predictions of these models are consistent with the location of ancient cities.
9. “The Diffusion of Epichoric Scripts and Coinage in the Ancient Hellenic Poleis.” With Yuxian Chen. Version: October 13, 2024. PDF Supplementary Material.
Abstract. The innovation and adoption of technologies are crucial for economic growth. However, much less is known about the process of technological adoption or diffusion, especially in ancient times. This paper attempts to bridge the gap by exploring the adoption and diffusion of the Greek alphabet (via its epichoric scripts) and coinage issue by different poleis as technological innovations in the ancient Hellenic poleis. We focus mainly on the spatial diffusion properties in the adoption of the two technologies. With timing and location information, we construct a panel model and estimate a “contagion” style diffusion model. We also explore the role of a number of time-invariant factors, including novel applications of network tools, such as concepts of centrality via a directed weighted network, in the technological adoption processes utilizing a survival model. We find that the diffusion or adoption of the two technologies display both similarities and differences. Diffusion of the two technologies exhibits dynamic interdependence and “active” (deliberate) action seems to matter for both. Overall centrality has a positive role for script while a negative role for coinage adoption. Connecting to the theory, the findings on script adoptions confirm predictions of a spatial logit model that they cluster. The examination of the emergence of coinage is guided by a general equilibrium model of interpolis trade with shipping costs and money that confirms the importance of coinage union and regional federations along with local geography and centrality.
——————————————————————————————————————–
IN-PROCESS AND INACTIVE WORKING PAPERS
8. “The Global Leapfrogging of Urban Growth.” With Shengbin Wei. June 2024. In progress.
While only a few cities existed thousands of years ago, they have become pivotal in modern society. This paper delves into the transformation of cities over thousands of years, examining their growth and flourishing. By leveraging a historical dataset of cities dating back nearly six thousand years, we explore the phenomenon of global leapfrogging of urban growth. Our findings reveal that geography has a modest impact on urban development, whereas the network properties of the system of cities play a significant role in urban growth. Furthermore, we observe that urban agglomerations tend to follow a sequential growth pattern. The research also emphasizes the importance of a city’s age in determining its population size and growth rate, highlighting the intricate interplay between urban geography, networks, and the historical context of urbanization.
7. “Trade and Housing Prices in US Cities.” With Jeffrey P. Cohen. September 22, 2023. Revised. PDF
Abstract. Estimating how much of household income is (and should be) spent on housing, and theoretical models of housing price growth determination, are important issues in urban and housing economics. Urban models often examine the consequences of domestic trade for city structure. We develop a theoretical model resting on a three-level hierarchy: the production of each city’s traded final goods uses labor, physical capital, and locally produced intermediates interpreted as specialized
labor. The traded goods are used to produce a composite that is used for consumption (of housing and non-housing goods) and investment.
We test a aggregative model, that is obtained from the above ingredients, at spatial equilibrium among cities with capital mobility between them exhibits empirical evidence on housing share expenditures that are consistent with the commonly assumed share of 30 percent. Using instrumental variables (IV), and a unique set of instruments including time-varying MSA-level military contract awards and MSA net migration flows, we identify MSA-level GDP growth impacts on MSA house price growth, based on an equation that follows from imposing spatial equilibrium across cities. In general, our empirical
estimation of the theoretical model confirms a positive and significant relationship between GDP growth and house price growth. We also cannot reject the hypothesis that the housing consumption share is approximately 30 percent of household income. Our theoretical approach, synthesis of MSA-level data from numerous sources, and empirical analysis are novel.
6. “Dynamics of COVID-19 Transmission within and across US Counties.” With Liuyi Ye. November 2020. Working Draft and Slides on request.
5. “International Tourism and Short-Run Growth.” With Yuxian Chen. August 30, 2020. PDF
Abstract. Using a panel of 157 countries for 1995–2017, this paper explores the relationship between tourism specialization and short-run growth. Making use of bilateral tourism and manufacturing flows, differences in importing countries’ preference , and demand side shocks, defined in terms of GDP per capita of tourism-importing countries, we construct an instrument for tourism specialization. 2SLS estimation results are very close to those obtained with OLS estimation results, but are associated with larger standard errors. We find that an 1% increase in tourism specialization is (on average) associated with 0.01 percentage point (or 0.5% in terms of elasticity) increase in the growth rate of GDP per capita for OECD countries, though it does not have a statistically significant effect when all countries are included. Voxeu.org post: “International tourism and short-run growth: Reviewing the trade-off in the age of COVID-19.” With Yuxian Chen. September 15, 2020
4. “On the Dynamics of Corruption.” With Costas Azariadis. June 25, 2020. Earlier version of article No. 109 with the same title, under Publications. PDF
Abstract. To examine the joint evolution of corruption and per capita GDP, we augment the standard lifecycle model of capital accumulation by three endogenous state variables that describe institutions and culture, and by three fixed parameters that proxy for personal morality and social interactions. Institutions that regulate economic incentives are decided by majority vote over a binary agenda that pits “strong” against `weak” property rights. Culture consists of slow changing social conventions which generate behavioral norms in the public and private sectors. Norms spread consumption externalities that impact the occupational opportunities of current households, and become in turn a reflection of past household choices. Our main theoretical finding is that societies with collectivist cultures and corruption-tolerant norms behave very differently from the individualistic ones of neoclassical growth theory. Collectivist society features include: (a) highly nonlinear GDP and corruption dynamics; (b) dominant roles for culture and social norms as engines of institutional quality, corruption and growth; and (c) majorities that favor diluted property rights, thus splitting the world economy into individualistic and collectivist convergence clubs with two distinct stable long-run states. These hypotheses receive a fair amount of support from international data.
Variations in social norms, culture and human capital typically explain more than half of the variance in per capita GDP across countries and time.
Many alternative measures of culture seem to be highly significant determinants of corruption and institutional quality. The fact that we control for culture in many alternative ways supports our confidence in the largely favorable tests of our main hypotheses.
JEL codes: F43, O11, O43, O47, D70, E71, Z10. Keywords: growth, institutions, corruption, social norms, culture, voting, social interactions.
3. “Vacancies in Housing and Labor Markets.” With Jeffrey E. Zabel. June 27, 2017. Under revision. PDF. The model of this paper is included in Ioannides and Zabel, “Housing and Labor Market Vacancies and Beveridge Curves: Theoretical Framework and Illustrative Statistics.” In: Ioannides, Yannis M., editor. Recent Developments in the Economics of Housing. Edward Elgar. 2019. Vol. II. PDF on request.
Abstract. The Great Recession of 2007–2009 has prompted a focus on the link between the housing and business cycles. We model the housing and labor markets by means of a DMP-type model that treats housing and labor supply as joint decisions and highlights the interdependence of vacancies in these markets. We estimate this at the MSA level using data on housing vacancies from the US Census Bureau’s Housing Vacancy Survey (HVS) starting in 1986 and on job vacancies from the Conference Board’s Help-Wanted Index starting in 1951. In particular, we estimate a Beveridge Curvefor labor markets that includes spillovers from vacancies in the rental and homeownership housing markets, as well as novel Beveridge curves for owner and rental housing markets. We then estimate VAR models for housing and job vacancies. Results from impulse response functions show that shocks to rental and homeownership vacancies have negative and significant impacts on job vacancies.
2. “Why Productivity Enhancing Reforms Will Help Greece Exit the Crisis and Usher in Long Run Growth.” January 24, 2015. PDF.
Abstract. The paper first assesses various ideas about getting growth started, and what might be hampering that. It also details what we could expect in the way of productivity growth when reforms currently envisioned and hopefully in progress are brought to fruition. The discussion draws extensively from the case of the Finnish Great Depression, an episode that all things considered is quite similar to the Greek crisis, which could well justify the term Greek Great Depression. It was precipitated by the shock of the collapse of the Soviet Union, Finland’s greatest trading partner at the time, but was also accompanied by a banking and credit crisis. It was followed by an admirable period of economic growth, which I find a rich source of lessons for the Greek crisis. The paper details growth-hampering features of the Greek educational system and discusses in depth growth-enhancing properties of market deregulation. Small improvements in each of many markets and industries can add up to significant contributions to Greece’s total factor productivity growth performance. Second, in the immediate aftermath of fiscal stabilization, the problem of the Greek trade deficit, which some consider as the principal cause of the crisis remains acute. The considerable improvement in unit labor costs that has taken place has not been followed by a commensurate improvement in the trade deficit. Recapturing and realizing gains in foreign markets is in part a problem that Greece shares with other “peripheral” EU countries, and to a degree not sufficiently appreciated and widely discussed. Real appreciation of the euro appears to be mainly due nominal exchange rate appreciation rather than domestic costs (measured via either unit labor costs or the consumer price index). This in turn suggests that in order for Greece to improve its advantage in international markets it needs to accelerate its effort at productivity improvements and just as much at growth-enhancing product market reforms.
1. “Random Graphs and Social Networks: An Economics Perspective,” Revised June 2015. 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.
