Essays in Housing and Regional Economics

Abstract

This dissertation comprises three essays that address different questions pertaining to housing economics and regional differences in economic dynamics. In the first chapter, I consider how economic shocks propagate between cities' housing markets, generating differences in the local exposure to national housing cycles. I propose an explanation of house price contagion based on migration spillovers between U.S. cities: Increases in house prices as a result of local economic shocks and housing supply constraints can drive out-migration to other cities. These migration flows are more likely to affect other cities that have stronger pre-existing migration links to the origin cities, and increase house prices more at the destinations with greater migration exposure. In order to identify causal spillover effects between cities, I use the network structure of inter-city migration to develop an instrument for exposure to house price changes in other cities. I find that an increase in other cities' house prices by 10% in the long run causes a 6.3% house price move in a city exposed to the shock through migration links. To assess the quantitative significance of this spillover mechanism, I consider the ability of the predicted indirect effects of historical shocks through migration spillovers to explain historical house price patterns. For example, I show that migration spillovers from the effect of interest rate declines on house prices in other cities can explain 32% of the cross-sectional variation in house price growth during the run-up to the housing boom of the 2000s. In the second part of the first chapter, I quantify the aggregate impact of migration spillovers on U.S. house price dynamics and study the effect of changes in migration costs and housing supply constraints. To do so, I develop and estimate a dynamic spatial equilibrium model that incorporates forward-looking migration choices. After estimating this model with U.S. data, I find that lower migration costs on average reduce the dispersion in house price growth: without worker mobility, the spread in house price growth across cities in response to wage shocks would be 65-70% larger. Moreover, declines in worker mobility increase the impact of housing policy on the distribution of house price growth across cities. In the second chapter, which is co-authored with Anna Stansbury and Bledi Taska, we study the effect of employer concentration on wages in the U.S. We distinguish between within-occupation employer concentration and outside-occupation job options, identifying outside-occupation options using new occupational mobility data from 16 million resumes. Using shift-share instruments to identify plausibly exogenous local variation, we find that moving from the median to 95th percentile of employer concentration reduces wages by 3% on average and by 6% for workers in the lowest quartile of outward occupational mobility. Our findings imply that policymakers should take employer concentration seriously, but that measures of employer concentration – typically calculated for single occupations – should be considered alongside the availability of outside-occupation options. In the third chapter, I study why some households choose to incur much larger housing cost burdens than others relative to their incomes. Using a simple forward-looking consumption framework, I argue that expectations of future income growth should affect the willingness to choose large housing consumption relative to current income. To test this hypothesis, I develop a new measure of expected occupational career growth based on long-run career trajectories observed on worker resumes and show that it captures intuitive patterns of lifecycle career dynamics. Using this measure, I estimate that renter households with 10% higher career income growth expectations on average have 5% higher cost-to-income ratios compared to similar households in the same metropolitan area.