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Creator: Eckert, Fabian and Kleineberg, Tatjana Series: Institute working paper (Federal Reserve Bank of Minneapolis. Opportunity and Inclusive Growth Institute) Number: 047 Abstract: Children's education and economic opportunities differ substantially across US neighborhoods. This paper develops and estimates a spatial equilibrium model that links children's education outcomes to their childhood location. Two endogenous factors determine education choices in each location: local education quality and local labor market access. We estimate the model with US county-level data and study the effects of a school funding equalization on education outcomes and social mobility. The reform's direct effects improve education outcomes among children from low-skill families. However, the effects are weaker in spatial general equilibrium because average returns to education decline and residential and educational choices of low-skill families shift them toward locations with lower education quality.
Keyword: Spatial economics, Intergenerational mobility, Education reform, Regional labor markets, Equality of opportunity, and School access Subject (JEL): I28 - Education: Government Policy, R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics, I24 - Education and Inequality, E62 - Fiscal Policy, R12 - Size and Spatial Distributions of Regional Economic Activity, and E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity -
Creator: Althoff, Lukas, Eckert, Fabian, Ganapati, Sharat, and Walsh, Conor Series: Institute working paper (Federal Reserve Bank of Minneapolis. Opportunity and Inclusive Growth Institute) Number: 043 Abstract: Large cities in the US are the most expensive places to live. Paradoxically, this cost is paid disproportionately by workers who could work remotely, and live anywhere. The greater potential for remote work in large cities is mostly accounted for by their specialization in skill- and information-intensive service industries. We highlight that this specialization makes these cities vulnerable to remote work shocks. When high-skill workers begin to work from home or leave the city altogether, they withdraw spending from local consumer service industries that rely heavily on their demand. As a result, low-skill service workers in big cities bore most of the recent pandemic’s economic impact.
Keyword: Remote work, High-skill services, and Technological change Subject (JEL): R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes, R12 - Size and Spatial Distributions of Regional Economic Activity, and O33 - Technological Change: Choices and Consequences; Diffusion Processes -
Creator: Eckert, Fabian, Hejlesen, Mads, and Walsh, Conor Series: Institute working paper (Federal Reserve Bank of Minneapolis. Opportunity and Inclusive Growth Institute) Number: 024 Abstract: We offer causal evidence of higher returns to experience in big cities. Exploiting a natural experiment that settled refugees across labor markets in Denmark between 1986 and 1998, we find that refugees initially earn similar wages across locations. However, those placed in Copenhagen exhibit 35% faster wage growth with each additional year of experience. Faster sorting of workers towards the type of establishments, occupations, and industries typically found in cities accounts for the vast majority of this urban wage growth premium.
Keyword: Regional labor markets, Urban, Agglomeration economies, Resttlement, and Wage differentials Subject (JEL): J31 - Wage Level and Structure; Wage Differentials, R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes, J61 - Geographic Labor Mobility; Immigrant Workers, R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics, and R12 - Size and Spatial Distributions of Regional Economic Activity -
Creator: Eckert, Fabian, Ganapati, Sharat, and Walsh, Conor Series: Institute working paper (Federal Reserve Bank of Minneapolis. Opportunity and Inclusive Growth Institute) Number: 025 Abstract: Since 1980, economic growth in the U.S. has been fastest in its largest cities. We show that a group of skill- and information-intensive service industries are responsible for all of this new urban bias in recent growth. We then propose a simple explanation centered around the interaction of three factors: the disproportionate reliance of these services on information and communication technology (ICT), the precipitous price decline for ICT capital since 1980, and the preexisting comparative advantage of cities in skilled services. Quantitatively, our mechanism accounts for most of the urban biased growth of the U.S. economy in recent decades.
Keyword: High-skill services, Urban growth, and Technological change Subject (JEL): R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes, J31 - Wage Level and Structure; Wage Differentials, R12 - Size and Spatial Distributions of Regional Economic Activity, and O33 - Technological Change: Choices and Consequences; Diffusion Processes