Working Papers

"The Great Divergence and Unemployment"

[Working Paper][Slides]

Abstract: This paper documents novel empirical facts about regional divergence between 2005-2019 in the US, showing that high-skill, high-rent cities also experience a reduction in long-run unemployment rates. I develop a spatial equilibrium model with unemployment, featuring workers of different skill levels who share a housing market. The calibrated model shows that the share of high-skill workers is inefficiently high in high-wage, high-rent locations. This misallocation is caused by the inseparability of the labor and housing market locations. Comparing the model to its competitive counterpart shows that search frictions moderate the divergence, allowing an additional channel to balance the spatial equilibrium.

"Inflation, Skill Loss During Unemployment, and TFP in the Long Run"

 (with Paul Jackson) [Working Paper] [Slides] 

Abstract: We develop a search model with frictional goods and labor markets to study the long run relationship between inflation, unemployment, and TFP when workers lose skills during unemployment. As inflation increases, fewer jobs are created, workers experience longer unemployment durations and their skills deteriorate, causing TFP to decline. Our calibrated results show that transitioning from the Friedman rule to 10% annual inflation lowers TFP by 4.3%. A stochastic version of the model demonstrates that prolonged periods of inflation, such as the 1970s in the US, can have lasting negative effects on productivity.

"Information Barriers and Housing Tenure Choice: Do Local Ties Matter?" 

(with Jae Hong Kim) [Working Paper] 

Abstract: This paper explores the extent to which ties to migration destinations affect housing tenure decisions for movers in the US, in particular, long-distance (LD) movers.1 Using American Community Survey from 2012 to 2019, we show that LD movers are less likely to own their next home compared to short distance (SD) movers by 5.1 percentage points. We explore how various channels of local ties affect LD movers’ housing tenure choices. We find that, among LD movers, the lack of geographic proximity reduces the likelihood of owning their next home, while social connectedness can mitigate this effect substantially. This result is robust across different empirical specifications. Our analysis also shows that these local ties bear very different significance for SD movers’ housing tenure choices compared to LD movers.

"Rent and Growth Control in a Housing Search Model: Theory and Evidence" 

Abstract: The vacancy rate of rental housing is about five times the vacancy rate of homeowner housing. How do rent control policies affect the outcome of landlords and tenants with non-rent control units in the rental housing market, which is highly frictional? This project develops a search and matching model of the frictional rental housing market with search friction, productivity growth, and rent control shocks to study how rent control policies shape rental market outcomes for landlords and tenants with rent control units, as well as non-rent control units. It also studies the effects on the supply of rental housing. The model shows that an increase in productivity growth rate would reduce optimal occupancy duration and raise the unhoused rates and vacancy rates. In contrast, an increase in the eviction cost would have the opposite effect. More stringent land use regulations would raise the market tightness as well as the unhoused rate. Comparing the model with rent control policies to the one without, I find that rent control raises the price of non-rent-controlled units, reduces market tightness, and reduces the rate of unhoused renters.