WORKING PAPERS
Within-city Income Inequality, Residential Sorting, and House Prices [New Draft (August 2021)]
Abstract: This paper studies the impacts of rising income inequality on residential choices and house prices within a city. I develop a monocentric city model with continuous income distribution and endogenous housing supply. The household simultaneously chooses a location and housing quality within the city. The key feature of the model is that the net costs of living further from the city center consist of a common component, and a component that is increasing with income. The model can generate imperfect sorting equilibria where households at both ends of the income distribution tend to locate closer to the city center. Substantial top income growth causes central locations to become gentrified: high-quality, expensive houses are built near the city center; many of the earlier poor residents move to more affordable non-central locations. The greenbelt causes city-wide increase in housing costs and reduces welfare when the income growth for the rich is substantial, and the welfare loss is most significant for low-income households.
Urban Containment Policy and Housing Affordability: Theory and Evidence from the Southern Ontario Greenbelt (with Aidi Yu) [Draft Coming Soon]
Abstract: We evaluate the impacts of urban growth boundary on housing affordability and household welfare within a city. We first develop a monocentric city model with a continuum of income and endogenous housing supply. Each household chooses housing quality and a location within the city, and the net cost to travel to the city center is income-dependent. We show that in equilibrium, the greenbelt does not change the income-location relationship within a city. In response to population growth or larger income gap, the greenbelt deceases housing qualities near the city edge and causes citywide increase in unit housing prices. Using the confidential micro files of the Canadian Census of Population, we verify the theoretical predictions of the model. In the counterfactual exercise, opening up the greenbelt for construction will decrease land rents, and the welfare implications depend on income heterogeneity of the city.
Neighborhood Externalities and Residential Sorting [Draft]
Abstract: This paper studies the role of endogenous neighborhood amenities in determining internal city structure, residential sorting, and house prices. The amenity levels across locations in a city depends on the location of high-income households: living closer to the rich provides better access to amenities. Rich households benefit more from the externalities that they generate. The model can generate rich income-location relationships, depending on the interactions between endogenous amenities and commuting costs. When the income elasticity of commuting costs is relatively low, the model can generate polycentric city structure: endogenous amenities and low commuting costs together enable the formation of sub-centers. When the effects of endogenous amenities dominate, higher density near the city center facilitates provision of amenities, making the central locations more attractive for the rich.
WORK IN PROGRESS
Remote Work and Residential Choices: the Impacts of COVID-19 on the Housing Market
Spatial Sorting of Homeownership
Within-city Income Inequality, Residential Sorting, and House Prices [New Draft (August 2021)]
Abstract: This paper studies the impacts of rising income inequality on residential choices and house prices within a city. I develop a monocentric city model with continuous income distribution and endogenous housing supply. The household simultaneously chooses a location and housing quality within the city. The key feature of the model is that the net costs of living further from the city center consist of a common component, and a component that is increasing with income. The model can generate imperfect sorting equilibria where households at both ends of the income distribution tend to locate closer to the city center. Substantial top income growth causes central locations to become gentrified: high-quality, expensive houses are built near the city center; many of the earlier poor residents move to more affordable non-central locations. The greenbelt causes city-wide increase in housing costs and reduces welfare when the income growth for the rich is substantial, and the welfare loss is most significant for low-income households.
Urban Containment Policy and Housing Affordability: Theory and Evidence from the Southern Ontario Greenbelt (with Aidi Yu) [Draft Coming Soon]
Abstract: We evaluate the impacts of urban growth boundary on housing affordability and household welfare within a city. We first develop a monocentric city model with a continuum of income and endogenous housing supply. Each household chooses housing quality and a location within the city, and the net cost to travel to the city center is income-dependent. We show that in equilibrium, the greenbelt does not change the income-location relationship within a city. In response to population growth or larger income gap, the greenbelt deceases housing qualities near the city edge and causes citywide increase in unit housing prices. Using the confidential micro files of the Canadian Census of Population, we verify the theoretical predictions of the model. In the counterfactual exercise, opening up the greenbelt for construction will decrease land rents, and the welfare implications depend on income heterogeneity of the city.
Neighborhood Externalities and Residential Sorting [Draft]
Abstract: This paper studies the role of endogenous neighborhood amenities in determining internal city structure, residential sorting, and house prices. The amenity levels across locations in a city depends on the location of high-income households: living closer to the rich provides better access to amenities. Rich households benefit more from the externalities that they generate. The model can generate rich income-location relationships, depending on the interactions between endogenous amenities and commuting costs. When the income elasticity of commuting costs is relatively low, the model can generate polycentric city structure: endogenous amenities and low commuting costs together enable the formation of sub-centers. When the effects of endogenous amenities dominate, higher density near the city center facilitates provision of amenities, making the central locations more attractive for the rich.
WORK IN PROGRESS
Remote Work and Residential Choices: the Impacts of COVID-19 on the Housing Market
Spatial Sorting of Homeownership