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Urban Economics and Places

Paper Session

Sunday, Jan. 7, 2024 1:00 PM - 3:00 PM (CST)

Marriott Rivercenter, Conference Room 20
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Janet Kohlhase, University of Houston

Work From Home, Commuting Time, and Intracity House-Price Gradients

Jinwon Kim
,
Sogang University
Dede Long
,
California State University-Long Beach

Abstract

Working from home (WFH) has grown increasingly popular in the past two decades in the U.S., and the COVID-19 pandemic is the latest catalyst in the rise of this practice. We hypothesize that WFH reduces not only the frequency of physical commutes but also time cost of individual commutes by lowering urban congestion levels, both of which decrease workers’ commuting costs and thereby flatten house-price gradients. Using our novel data on travel time for a sample of commute routes in California collected from Google Maps, we first confirm that COVID-19 as the WFH-boosting shock induced larger decreases in morning travel times in cities having a higher WFH potential. We find evidence of the indirect effect of WFH on house-price gradients that runs through its effect on commuting time; this effect is quantitatively similar to the direct effect of WFH coming from commute frequency reductions.

The Welfare Consequences of Incoming Remote Workers on Local Residents

Hoyoung Yoo
,
University of Wisconsin-Madison

Abstract

This paper studies the impact of an influx of high-skilled remote workers on local residents in destination cities. Dozens of U.S. municipalities have recently implemented Remote Worker Relocation Programs that provide cash incentives to remote workers who relocate to their city. Using Tulsa Remote as a case study—the largest and the earliest such program—and employing an event study design, I find that the program attracted remote workers but had offsetting effects on local employment across sectors. The local service sector saw growth, while the wholesale trade sector experienced a decline. To assess the overall and distributional effects of this kind of policy, I build and estimate a structural equilibrium model that takes into account workers' industry choices with a nonemployment option. The program slightly improves the average welfare of local residents primarily due to higher wages and a greater variety of local goods, which compensates for increased rents and prices of local goods. However, nonemployed and low-skilled renters in the tradable sector are adversely affected. Finally, a Remote Worker Relocation Program financed by local taxes is still welfare-enhancing, but the average net benefit of the program almost disappears.

The Rise of E-commerce and Generational Consumption Inequality: Evidence from COVID-19 in South Korea

Eunjee Kwon
,
University of Cincinnati

Abstract

This paper investigates how the local COVID-19 outbreak, acting as a sudden negative shock to mobility, led to a significant generational disparity, with younger people benefiting disproportionately from the ability to transition to online consumption. Employing credit card transaction data linked to cardholders’ demographic characteristics, we construct online spending shares by age group to study the generational disparity in online consumption when consumer mobility was constrained. We estimate a difference-in-difference model based on an exogenous regional outbreak of COVID-19 in South Korea. Our results show that when the mobility costs to offline stores unexpectedly increased due to the pandemic, middle-aged and older adults (aged 45 and above) were less likely to shift their spending online than younger adults (aged 20-44). The limited shift to the online consumption of older people resulted in decreases in their total consumption, while that of younger ones changed little, thereby increasing generational consumption inequality. With the rising trend in e-commerce, our findings emphasize the growing importance of generational differences in adapting to new shopping technologies.

The Aggregate Consequences of Place-Based Capital Subsidies

Yuming Fu
,
National University of Singapore
Shangming Yang
,
National University of Singapore

Abstract

Place-based capital subsidies are common but have ambiguous aggregate consequences. Using a general-equilibrium urban accounting model, we decompose the aggregate consequences into a labor-relocation effect and a capital-stock effect and study their tradeoffs in relation to the geography of capital subsidies. Simulation analysis offers several insights. First, without covariance with urban characteristics, the cost-of-capital dispersion across cities reduces welfare and aggregate productivity because the capital-stock loss exceeds the labor-relocation gains. Second, subsidizing cities with a relatively higher (lower) productive efficiency can raise aggregate productivity (welfare). Third, place-based capital subsidies can improve welfare or aggregate productivity when the disparity in urban efficiency is large and the cost-of-capital variance is about half its covariance with urban efficiency. The consequences of changing geography of capital subsidies in China between 2000 and 2007 are evaluated using these insights.

Discussant(s)
Amanda Ross
,
University of Alabama
Steven G. Craig
,
University of Houston
Carlianne Patrick
,
Georgia State University
Daniel Wilson
,
Federal Reserve Bank of San Francisco
JEL Classifications
  • R2 - Household Analysis
  • D1 - Household Behavior and Family Economics