Jordan Rosenthal-Kay

To combat global warming, climate policies like carbon taxes, renewable subsidies, and carbon tariffs must be implemented to phase out fossil fuel consumption and lower emissions. Who are the winners and losers of such policies? Through a simple Integrated Assessment Model with heterogeneous countries and international trade in goods and energy, we study both the costs of implementing these policies unilaterally, and the local costs and global gains of international policy cooperation. To do so, we express and decompose welfare changes under different policy regimes to the first order as a function of sufficient statistics that depend on observables and identifiable elasticities like nations’ energy mix, energy rents, trade shares, energy supply and demand elasticities, and damage parameters. We show that climate change has non-trivial reallocation effects through international trade in goods and energy. Pursuing unilateral policies generates strong leakage effects, primarily through energy trade. Global climate policy cooperation mitigates leakage, but not all countries have an incentive to participate. Regional climate clubs operate differently: an EU-wide club reduces global emissions but creates internal winners and losers, while an ASEAN climate club achieves smaller global gains but delivers welfare increases for member nations.

How do local housing markets interact across space and time? To answer this question, this paper develops a tractable dynamic spatial equilibrium model in continuous time. Our model features forward-looking housing developers and inherits the features of many quantitative urban models. We are able to globally solve for the transition dynamics absent linearization techniques by relying on the model’s spatial equilibrium condition, which dramatically reduces the dimensionality of the state space. We show numerically that following a demand shock, housing adjustment paths may be nonmonotonic, as short-run demand increases may induce some developers to overshoot their long-run housing supply. We apply our model to study how zoning restrictions affect the dynamics of housing development following local housing supply and demand shocks in San Francisco. We infer de facto zoning restrictions using bunching in the building height distribution over different zoning classifications and use our estimates of latent zoning parameters to quantify the model.

Cities are engines of economic development, but the world economy’s ability to reap the benefits of urbanization is limited by the costs of urban scale. Urban costs depend on commuting costs and the city’s capacity to expand up and out. These three dimensions of cities’ urban costs combine to form a city’s urban cost elasticity, which measures how urban costs scale with population size. Using a structural model and geospatial data on over 10,000 cities, I measure urban costs globally. Cities in developing countries grow by building out, rather than up, even though residents face higher transportation costs. Compared to cities in the developed world, developing nations’ cities have urban cost elasticities that are 35% higher. Embedding my estimates of urban costs in a quantitative spatial model featuring a system of cities and rural-to-urban migration, I find that high urban costs have large implications. Lowering urban cost elasticities to the average level observed in the United States would raise welfare in developing nations by 66%, six times the gains in the rich world. One third of the gains in the developing world are driven by general equilibrium responses, as workers both move out of agriculture and reallocate to more productive cities. To examine how policy might achieve these gains, I focus on urban road paving, which I find to be a cost-effective way to reduce urban costs in developing economies. Additionally, high urban costs not only affect economic development, but also hinder the efficacy of urbanization as a climate change adaptation strategy.

The household’s price elasticity of demand is a key input to many economic models’ construction of markups and the assessment of consumer surplus. We measure the price elasticity of demand for around 14,000 products by region-year using retail scanner data. In all, we estimate over 7.5 million demand elasticities. We find that the distribution of these elasticities is stationary over time. However, we document substantial spatial heterogeneity in consumers’ price sensitivity: consumers in the largest markets are the most price elastic. As demand elasticities are a key input into the measurement of markups, our results suggest that any conclusions that markups are rising in retail markets must be driven by assumptions on conduct.

One rationale for place-based policy is that local development produces positive productivity spillovers. We examine the employment spillovers from a large local development project: opening a casino. Comparing employment in neighborhoods that won a casino license to runner-up neighborhoods that narrowly lost, we find that casinos create jobs in their immediate vicinity. However, we estimate net job losses overall when considering the broader neighborhood. Employment gains concentrate in the leisure and hospitality industry, suggesting spillovers are industry-specific or are driven by demand-side forces like trip-chaining. We develop theory to show that our estimates imply a rapid spatial decay of productivity spillovers.