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Urban Development and Economics

Paper Session

Saturday, Jan. 4, 2025 8:00 AM - 10:00 AM (PST)

San Francisco Marriott Marquis, Nob Hill D
Hosted By: American Real Estate and Urban Economics Association & American Economic Association
  • Chair: Rui Du, Oklahoma State University

Collateral Damage? The U.S.-China Trade War's Impacts on Southeast/South Asian Economies' Urban Economic Development

Matthew Kahn
,
University of Southern California
Wen-Chi Liao
,
National University of Singapore
Siqi Zheng
,
Massachusetts Institute of Technology

Abstract

The US-China trade war results in global value chain restructuring. The new growth opportunity vastly remains in developing Asian countries. We present a large-scale intra-country and inter-country analysis covering all Southeast/South Asia countries. A systematic uniform algorithm delineates the cities of these countries. For all these countries, we extract air pollution, nightlight, and geographic condition data from satellite images, input and output data from mass microdata of firms, and transport infrastructure data from maps. We aggregate data to the city level. We first analyze the trade-war tariff differentials’ effects on countries' exports at the country level. A Bartik instrument is constructed with county-specific tariff differentials as the shift and city industrial composition as the share. We examine how this tariff privilege affects cities' production and find important pre-existing conditions (e.g., FDI, transport infrastructure, geographic relations with China) that, together with the tariff privilege, suffice city growth. As the US-China trade war was unexpected, we examine Southeast/South Asia countries' readiness to fasten their urban economic development with environmental sustainability. We inquire whether the rapid economic development in the region comes with an unintended consequence of environmental costs as collateral damages arising from the trade war.

Priced-out: Rent Control, Wages, and Inequality

Isaac Hacamo
,
Indiana University
Geraldo Cerqueiro
,
Católica-Lisbon School of Business and Economics
Pedro Raposo
,
Católica-Lisbon School of Business and Economics
Derek Wenning
,
Indiana University

Abstract

We show that after a quasi-exogenous loss of rent control, low-income workers’ earnings decline significantly, while high-income workers remain unaffected, even as both are equally likely to migrate outside the city. The wage decline stems from transitions to lower-quality jobs. Additional tests suggest that, in contrast to high-income, low-income workers face high commuting costs. For example, the negative impact on wages is uniquely concentrated among individuals who do not own a personal vehicle and rely on public transit for commuting. We introduce a general equilibrium model of residential and employment location choices in the presence of rent control. A means-tested transfer could achieve the same earnings gains as rent control but with significantly lower taxation on landlords. Housing vouchers must however be targeted toward neighborhoods with low commuting costs to high-productivity areas; otherwise, vouchers could fail to improve labor outcomes and increase income inequality.

Roads to Development? Examining the Zambian Context Using AI-Sat

Cong Peng
,
Peking University
Wenfan Chen
,
JP Morgan Chase

Abstract

We create a novel road surface condition dataset by applying artificial intelligence to high-resolution satellite images. Combining a range of remote sensing data and ground surveys, we study the effect of road improvement on economic and environmental outcomes in Zambia. We find that market access increases the size of urbanized areas measured by built-up, at the cost of increasing air pollution and deforestation. Improvements in market access do not improve income and even reduce average income in large cities, in line with the "urbanization without growth" phenomenon commonly observed in the African context.

Regulation, Market Structure, and Housing Affordability: An Investigation of Airbnb’s Decline in San Francisco

Lauri Kytömaa
,
Cornell University

Abstract

A primary objective of government regulation in the short-term rental market is to improve housing affordability for local renters by incentivizing a shift of properties from the STR market to traditional rental markets. I study how the composition of host types in the STR market and the method of enforcing regulations are both first-order determinants for policy success. I build on theoretical work of firm behavior under regulations to explain why increased regulatory costs may disproportionately cause exit by small suppliers. Using a difference-in-differences analysis of San Francisco’s 2018 enforcement of short-term rental regulations after settling with Airbnb, I present four main findings: (i) I find that all Airbnb hosts have dramatically increased rates of exit under the new regulatory regime that emphasizes licensing, but that small providers are disproportionately effected, (ii) Even when larger property managers do exit, they tend to shift supply to the regulation-exempt, medium-term Airbnb market (30+ night stays), (iii) properties that remain active in the regulated market do not reduce availability or nightly stays suggesting that annual renting limits are not effectively enforced, and (iv) I find no evidence of reduced rental rates, home prices, or increased housing inventory following increased enforcement of local rules.

Discussant(s)
Yuta Suzuki
,
Shanghai Jiaotong University Antai
Marco Giacoletti
,
University of Southern California
Jingting Fan
,
Pennsylvania State University
Brian Asquith
,
W. E. Upjohn Institute
JEL Classifications
  • R0 - General