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on Urban Economics and Policy |
| By: | Brian Greaney |
| Abstract: | I develop a dynamic quantitative spatial framework that combines key features of quantitative spatial and lifecycle housing models to study the distributional effects of spatially heterogeneous shocks. The model features many locations, moving costs, uninsurable income risk, lifecycle dynamics, housing tenure choice and housing frictions. The model is set in continuous time, which enables efficient computation. I apply the framework to analyze the welfare effects of heterogeneous productivity shocks across U.S. cities. I find that local productivity shocks have important distributional consequences: on average, a 1% shock to local productivity raises residents’ welfare by 0.37%. The pass-through from a local productivity shock to welfare varies substantially by age and housing tenure. I show that homeownership plays a central role in spatial redistribution: in an otherwise identical model without homeownership, the average welfare effect of a 1% local productivity shock is just 0.03%. This is because house price changes counteract the welfare effects of wage changes for renters, but augment them for owners. These results suggest that accounting for homeownership is essential for understanding the distributional effects of spatially heterogeneous shocks. |
| Keywords: | spatial dynamics; economic geography; migration; homeownership |
| JEL: | R12 R23 R0 J61 |
| Date: | 2026–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:103688 |
| By: | Isabella Agnes; Jessica Liu; Fatimah Shalaan; Michelle Tran; Erin Troland; Douglas A. Webber |
| Abstract: | In the pandemic era, people moved from high-density, expensive areas to more affordable areas, putting upward pressure on local housing prices. We examine the geographic distribution of rent growth during this time and its effects on renters. We use administrative new lease data from RealPage and household-level data on rent and income from the American Community Survey. We analyze rents and incomes using Public Use Microdata Areas grouped in two ways: by prepandemic rent levels and by pre-pandemic rent-to-income ratios. Rents grew more in areas with lower pre-pandemic rents but not in areas with lower rent-to-income ratios, consistent with higher-income remote workers moving away from high rent areas to more affordable areas. Lower-income households experienced larger increases in rent relative to their income compared to the median renter. However, area-level rent-to-income ratios reflect both compositional changes in renter populations from mobility and changes in local rents. We highlight the need for future work to track affordability for the same households over time to fully understand pandemic era affordability trends. |
| Keywords: | housing affordability; pandemic housing markets; remote work migration; rental housing |
| Date: | 2026–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:103752 |
| By: | Theodore Panagiotidis; Paraskevi Tzika; Georgios Voucharas |
| Abstract: | The housing market plays a central role in economic stability and social well-being across countries, but specifically in Greece, it has been shaped by crises, policy shifts, and external shocks over the last decades. We introduce the Greek Housing Market Uncertainty (HMU) index, a monthly newspaper-based measure designed to capture housing-specific uncertainty. Using Local Projections and their state-dependent and time-varying extensions, we examine the dynamic effects of HMU shocks on key housing market variables. The results show that house prices respond negatively to housing uncertainty shocks, albeit with a lag, while residential loan growth also declines significantly in the short run. The state-dependent analysis demonstrates that regimes matter, as adverse effects on house prices are stronger during periods of low economic growth or high foreign uncertainty. Time-varying estimations indicate heightened long-run effects during the Greek debt crisis. Regional analysis shows more severe and persistent declines in large cities compared to smaller cities, while newer dwellings are also more vulnerable to shocks. Overall, the HMU index provides a valuable tool for monitoring housing market risks, while the incorporation of state-dependent and time-varying analysis reveals the crucial role of economic regimes and evolving conditions in shaping the impact of housing uncertainty. |
| Keywords: | Housing Market Uncertainty, Housing Market, Greece, Local Projections, Regimes |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:hel:greese:223 |
| By: | Gabriel Ahlfeldt; Nathaniel Baum-Snow; Remi Jedwab |
| Abstract: | Tall buildings make up over 20% of real estate by value in the world's largest cities. Nonetheless, many governments constrain tall building construction, hindering urbanization and growth. Quantification for all cities worldwide using a canonical land use model disciplined with reduced form elasticity estimates indicates that eliminating existing height constraints would generate a welfare gain of 3.7% in developing economies. Aggregate land values would decline by 3.9%, incentivizing landowners to support height restrictions. Estimated elasticities of city population and built area with respect to aggregate city building heights are 0.13 and -0.16, reinforcing the quantitative evidence that tall buildings facilitate urban growth and compactness. Interactions between static demand factors and the geography of bedrock isolate 1975-2015 tall building construction driven by technology-induced reductions in the cost of height. Using indirect inference, we estimate a (congestion) elasticity of consumer welfare to urban density of -0.11. |
| Keywords: | Urban Density; Tall Buildings; Sustainable Urbanization; Urban Growth; Commercial Real Estate; Housing Supply; Urban Sprawl; Land Savings; Housing Affordability; Geographic Constraints. |
| JEL: | R11 R12 R14 R31 R33 O18 O13 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:gwc:wpaper:2026-012 |
| By: | Schuyler Louie; John Mondragon; Rami Najjar; Johannes F. Wieland |
| Abstract: | Most housing research relies on a single-margin model where a single housing price relates to a single housing quantity. We generalize this approach by introducing income inequality and housing quality. Two important challenges to studying housing supply (and demand) emerge: First, there is no singular housing supply function, instead there is a continuum of unit-supply functions indexed by quality. This implies that supply elasticity estimates are local average treatment effects (LATEs), not structural elasticities. Second, spillovers common in spatial settings may preclude even the LATE interpretation of estimates, which are instead local general equilibrium objects. Critically, these issues cannot be bypassed by using the land share of value to measure supply constraints as it is not even a diagnostic for supply constraints in the standard model. We suggest that understanding heterogeneity in incomes and housing services quality is likely critical to understanding housing markets more generally. |
| Keywords: | quality; inequality; housing markets |
| Date: | 2026–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:103704 |
| By: | Kaiji Chen (Emory University); Hanming Fang (University of Pennsylvania and NBER); Yang Tang (Nanyang Technological University) |
| Abstract: | Rapid economic growth creates large differences in lifetime incomes across generations. This paper examines the intergenerational redistribution generated by subsidized access to appreciating public assets in rapidly growing economies. We show that providing incumbent generations with subsidized access to these assets before future growth is fully capitalized into market values gives them an early claim on subsequent economic growth, thereby redistributing resources from future to incumbent generations. In the context of housing privatization, subsequent capital gains on privatized housing enable homeowners to trade up, further amplifying housing demand, house prices, and intergenerational redistribution. We evaluate the early ownership and capital gains channels of asset-based redistribution in a quantitative equilibrium model calibrated to China’s housing privatization. Relative to more standard pension-based redistribution, we show that asset-based redistribution delivers higher welfare for future cohorts while substantially reducing long-run fiscal burdens once economic growth unexpectedly slows. |
| Keywords: | Asset privatization; Intergenerational redistribution; Housing; Capital gains;Economic transition; Social security |
| JEL: | G28 E02 E5 G11 H2 |
| Date: | 2026–08–09 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:26-013 |
| By: | Kapanadze, Ketevani (European Research University (ERUNI)); Pytlikova, Mariola (CERGE-EI; MUNI Brno) |
| Abstract: | In response to COVID-19, Schengen countries temporarily reintroduced internal border controls, disrupting cross-border integration. Using this policy change as a natural experiment and monthly nighttime lights data, we estimate the short-run effects on European municipalities. Municipalities along internal Schengen borders experienced a 3–4% decline in economic activity relative to interior municipalities, with larger estimated effects when external-border municipalities form the comparison group. Losses were greater in smaller and less densely populated municipalities and along economically asymmetric East–West borders, whereas municipalities along more economically similar borders generally experienced smaller declines. The effects also depended on the pre-pandemic purpose of cross-border mobility: higher shares of work- and business-related travel, services, and shopping were associated with larger losses, while the results for leisure and social mobility are consistent with greater scope for domestic reallocation of activity. Overall, the findings show that the local consequences of internal border closures depend on municipality characteristics, cross-border economic asymmetries, and the purpose of mobility. |
| Keywords: | border closures, cross-border mobility, Schengen area, nighttime lights, local economic activity, border regions, COVID-19, European integration |
| JEL: | R11 R12 R23 F15 F22 C21 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18878 |
| By: | Belinda Tracey (Bank of England); Neeltje van Horen (University of Amsterdam and Centre for Economic Policy Research) |
| Abstract: | We examine how easing mortgage borrowing constraints affects entry into homeownership. Using administrative mortgage data and cross‑district exposure to the UK Help‑to‑Buy program, which reopened the 95% loan-to-value segment in 2013, we show that first‑time buyer purchases rose sharply in more exposed areas. Introducing a new proxy for financial support – based on the gap between observed and predicted down payments – we find that gains were concentrated among households unlikely to have relied on transfers, suggesting a weaker role for family wealth in enabling homeownership. Because these buyers tend to have higher incomes, the composition of homeowners shifted toward higher‑income households. |
| Keywords: | Homeownership;credit constraints;down payment;intrafamily transfers;housing wealth |
| JEL: | D31 E21 G18 G21 R21 |
| Date: | 2025–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023269 |
| By: | Hilber, Christian A. L.; Mense, Andreas |
| Abstract: | In most countries, during the 2000s and 2010s, house prices rose substantially relative to rents. This trend, however, was not uniform across space or time. The price-to-rent ratio increased much more strongly in the countries’ superstar cities, surged during economic expansion periods, but fell during times of economic crisis. These stylised facts are consistent with a model that features spatial variation in the supply-price elasticity and autocorrelated local demand changes that trigger persistent changes in rent-growth expectations. The model predicts that in supply-inelastic locations, positive (negative) demand shocks trigger increases (decreases) in the price-to-rent ratio that last several years. Stronger demand-change persistence and lower discount rates amplify this effect. We test our model predictions using panel data for England. Our instrumental-variable first-difference estimates suggest that over half of the 153% increase in the price-to-rent ratio between 1997 and 2018 in Greater London can be explained by our mechanism. |
| Keywords: | house prices;housing rents;price-to-rent ratio;price and rent dynamics;housing supply;persistence in demand changes;expectations;discount rate;land use regulation |
| JEL: | J1 Q15 |
| Date: | 2026–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129820 |
| By: | Robert C. M. Beyer; Nina Biljanovska; Alexandra Fotiou; Morgan Maneely; Mr. Frederik G Toscani |
| Abstract: | Amid sharp house price increases in some parts of Europe, housing affordability has again become one of the main concern of households. This paper conducts three complementary sets of analyses to shed light on the drivers and economic implications of declining housing affordability. First, using a structural VAR, we show that supply-side factors have become increasingly prominent drivers of house prices—a notable shift from the credit-driven price increases that preceded the Global Financial Crisis. Second, drawing on household-level EU-SILC data, we argue that the burden has fallen disproportionately on lower-income urban renters, who face both rising rents and diminishing prospects of transitioning to homeownership. This is especially true for financially more vulnerable renters who have seen their probability of becoming home owners fall by more than half since the pre-GFC period. Third, we provide new empirical evidence that the resulting widening of income and wealth gaps between owners and renters is compounded by the efficiency cost of reduced labor mobility, as high housing costs make it harder for workers to move to more productive locations – quantitively, housing affordability constraints might have led to around one million foregone moves within the EU over the past decade. The analyses underpin the policy recommendations to alleviate housing affordability challenges set out in the IMF’s 2026 Euro Area consultation, including the need to focus on national measures to boost housing supply, with a complementary role for EU-level action. |
| Keywords: | Housing affordability; house prices; income distribution; labor mobility |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/177 |
| By: | Behrer, A. Patrick (World Bank); Goodman, Joshua (Boston University); Goyer, J. Parker (College Board); Park, R. Jisung (University of Pennsylvania) |
| Abstract: | Nearly the entire world's population breathes air exceeding WHO pollution guidelines, but the extent to which that exposure impairs the accumulation of human capital is not well understood. We study this using longitudinal PSAT data on nearly 10 million U.S. high school students, comparing the same student's scores across attempts preceded by differing air quality and instrumenting for local PM2.5 with smoke from distant wildfires. A year of observed pollution exposure reduces learning by 0.04-0.06 standard deviations, or 14-19% of typical annual score growth. The damage comes almost entirely from moderate pollution days (8–12 μg/m3), below the EPA's historical standard, and from exposure during the school year rather than summer, pointing to instructional disruption as a mechanism. Effects are three times larger in disadvantaged schools and among Black and Hispanic students, who are harmed more by the same exposure. Exposure to air pollution widens achievement gaps. |
| Keywords: | air pollution, PM2.5, learning, student achievement, wildfire smoke |
| JEL: | I2 I24 Q5 Q53 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18904 |
| By: | Isaac Mann; David M. Levinson (TransportLab, School of Civil Engineering, University of Sydney) |
| Abstract: | Standard transport appraisal treats fare regulation in isolation, ignoring how price signals reshape urban geography. We bridge regulatory practice and quantitative spatial economics by constructing a Quantitative Spatial Transport Model (QSTM) for Greater Sydney, endogenising household and firm locations in response to transport shocks. Our framework extends the canonical quantitative spatial model by endogenising commuter mode choice and internalising network externalities through road congestion and the Mohring effect. Evaluating three public transport pricing interventions, including zero-fare, flat-fare, and fare-cap policies, we find that free transit is welfare-suboptimal, driven largely by operator revenue losses. In our setting, distance-based fares provide a spatial price signal that helps internalise resource costs and discourage sprawl, a signal that uniform flat fares mute. The model demonstrates that allocative efficiency requires a higher user contribution, revealing that weekly fare caps function as implicit subsidies for long-distance commuters. Higher fares trigger a spatial reorganisation where residents centralise to minimise commuting costs and firms decentralise to access labour. Ultimately, efficient distance-based pricing promotes a compact residential form, encourages polycentric employment, and reduces operator resource costs. |
| Keywords: | Quantitative spatial models, Transport appraisal, Fare regulation, Agglomeration economies, Spatial general equilibrium, Urban economics |
| JEL: | R40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:nex:wpaper:paper-2026-22 |
| By: | Pedro Henrique Gonçalves da Silva Napoli de Lima; Bruno Brandão Fischer; Ron Boschma; Gustavo Hermínio Salati Marcondes de Moraes |
| Abstract: | Why do some urban regions sustain a much broader range of economic activities than others? Evolutionary Economic Geography (EEG) has answered this question mainly through the principle of relatedness, in which urban scale has been treated as a control variable. Doing so, it has paid little attention to regional urban scale as a structural determinant of sectoral diversity. . We address this gap by combining the urban scaling tradition with EEG's capability-theoretic framework. Our study explores the relationship between sectoral diversity, urban size, and regional capabilities for US metropolitan statistical areas (MSAs) over the period 2012–2023. Three findings emerge. First, sectoral diversity scales logarithmically with population and the relationship is temporally stable across the panel — what we call the saturation principle: urban scale defines a diminishing-returns frontier for sectoral breadth. Second, regional capabilities (proxied by the Economic Complexity Index) are associated with deviations from this frontier and with the technological intensity of newly entered sectors. Third, urban scale conditions these capability effects asymmetrically — compressing the capability premium for sectoral breadth as regions approach the frontier, while amplifying the conversion of capabilities into more technologically intensive entries. Overall, the study contributes to bridging urban scaling theory and EEG by formalising urban scale as a structural boundary condition for regional diversification. |
| Keywords: | evolutionary economic geography, urban scaling, complexity economics, complex adaptive systems, regional diversification, geography of innovation |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2620 |
| By: | Maximiliano Dvorkin; Brian Greaney |
| Abstract: | The spatial distribution of wealth in the United States is very heterogeneous. We study the spatial distribution of wealth in a country and how it is shaped by regional earning characteristics and mobility frictions. For this, we develop a tractable model of consumption, savings and location choice with many regions, incomplete markets and heterogeneous agents facing persistent and transitory income shocks. Our theory extends a workhorse macroeconomic model of consumption and savings under uncertainty to an economy with multiple labor markets and costly mobility. Despite complex spatial and individual heterogeneity, we characterize the optimal consumption, savings and mobility decisions of workers in closed form. Mobility frictions increase precautionary savings as workers hedge against consumption fluctuations generated by moving decisions. The spatial distribution of wealth is primarily driven by the interaction between persistent income shocks, saving behavior and worker sorting over locations. Our results highlight the importance of accounting for worker mobility and regional heterogeneity in earnings dynamics when studying the spatial distribution of wealth. |
| Keywords: | mobility; precautionary savings; spatial equilibrium; wealth; inequality |
| JEL: | R12 R23 E21 J61 F16 |
| Date: | 2026–08–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:103686 |
| By: | Mendelberg, Tali (Princeton University); Novoa, Gustavo (Princeton University); Pietrzak, Adrian C. |
| Abstract: | Americans want government to improve housing affordability. Yet proposals for affordable housing often encounter public resistance. We argue for a neglected explanation: concerns that these proposals are insufficiently affordable. Using four original surveys with novel, precise measures of affordability and randomized developer and landlord profiteering, we find wide support for affordable housing when it primarily benefits people of low means and does not favor developer or landlord profiteering. This support holds even when the hypothetical building is proposed in the respondent’s neighborhood, support entails tradeoffs and costly behavior in the survey, and the policy requires tax increases. The tax finding replicates in election outcomes of actual ballot measures. Pro-poor sentiments shape these preferences, above and beyond self-interest, and offset the negative impact of racial attitudes. Buildings and policies that satisfy these sentiments draw much higher public support. However, common policies fail to do so. |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:frehb_v1 |