Essays on the Economics of Place

Abstract

This dissertation consists of three essays on the economics of place. The first chapter examines how adverse shocks in one period reverberate into the next, making regions less resilient to adverse shocks in the future. I study this in the context of Appalachia’s coal country, which has long been characterized by deep poverty, limited employment opportunities, and high rates of public assistance. Consistent with the predictions from a model describing how shocks influence the population and economic trajectory of exposed communities, I find that the adverse consequences of the contemporary (2007--2017) coal shock --- in terms of its effect on population, employment, earnings, and government transfers --- are more acute in counties that experienced larger historical declines in college-educated adults due to exogenous labor demand shifts in the 1980s. The adverse impacts of shocks can thus accumulate over time. Local employment shifts have persistent negative consequences, making future generations differentially vulnerable to new challenges.

Chapter two examines how declining local labor market opportunities influence investment decisions. Between 2011 and 2016, coal mining employment in Appalachia declined by over 50 percent. As the Appalachian region loses its major export industry, its capacity to adapt will hinge on the degree to which investments in human and physical capital respond to shifting local employment conditions. In chapter two, I exploit county- and CZ-level exposure to national shifts in coal demand to estimate the responsiveness of government transfers, educational investments, and place-based policies to the recent coal shock. While the coal shock sharply increased the receipt of certain social insurance programs, I find no statistically distinguishable impact on investments in postsecondary education and training. Current and proposed adjustment policies tend to focus on encouraging physical capital investments in exposed communities, but complementary investments in human capital will also likely be necessary to equip communities for the energy and economic shifts ahead.

In the third chapter, Tridevi Chakma and I interrogate the standard hedonic valuation approach to estimating the benefits of shifting local amenities. In a general equilibrium setting with elastic housing supply, we show how amenity improvements can yield an expansion of the housing market (the ``quantity'' effect) which mutes the capitalization of the amenity into housing prices (the ``price'' effect), such that inferring benefits solely from price changes underestimates the true willingness-to-pay. Empirically, we demonstrate how the elasticity of local housing supply affects valuations of amenity changes in the context of local air quality improvements induced by the Clean Air Act's PM2.5 standards, and present evidence that the price capitalization of air quality improvements is lower in places with more elastic housing markets.