We study a two-period principal–agent model of rental housing in which a landlord (principal) offers a contract to a tenant (agent). After the first period, a cost shock may occur that increases the landlord’s cost of providing the apartment in the second period. Two scenarios are compared. In one scenario, there is full contractual freedom, while in the other scenario, there is a tenancy law requiring the landlord to continue renting in the second period if the apartment was rented in the first period. Under symmetric information, gains from trade in the tenancy law regime can never exceed those under contractual freedom. However, we show that when the tenant has private information, the tenancy law can lead to strictly higher gains from trade.
Immigration continues to shape the economic and political debate in the United States. Yet, we surprisingly know little about the impact of immigration on the economic mobility of native children. Using recent data on changes in mobility and an identification strategy based on initial settlement patterns of immigrants, I study whether the large increase in the immigrant population between 1980 and 2010 had an impact on native intergenerational mobility. Despite concerns about immigration hurting native children, I find that the impact of immigration on native mobility is statistically insignificant. Moreover, I can rule out economically large effects. I show that this result can be explained by the insignificant impact of immigration on socioeconomic mechanisms previously associated with intergenerational mobility, such as parental employment or incarceration rates.
We examine whether culture-specific educational infrastructure influenced the location decisions of multinational enterprises by analyzing Japanese foreign direct investment (FDI) in the United States over the 1980s. Using the expansion of Japanese FDI following Reagan-era trade tensions, we test whether preexisting Japanese Studies programs at U.S. universities predict subsequent Japanese investment across 722 commuting zones. We find that zones with Japanese Studies programs in 1975 were approximately 25 percentage points more likely to receive Japanese investment in 1992, controlling for traditional determinants like Japanese population, manufacturing infrastructure, agglomeration, and market access. The results are robust to alternative empirical methods, including the instrumental variable approach. Our results suggest that “soft infrastructure”—culture-specific human capital pipelines—represents an overlooked location advantage in attracting FDI.
Why are populations more spatially concentrated in some countries than in others? And why does that concentration change over time? I study how international trade integration affects the within-country spatial allocation of population and the welfare implications of these reallocations. A one-sector quantitative spatial model isolates a key mechanism: lower international trade costs disproportionately benefit regions with high foreign import dependence, which tend to be less populated regions within their countries. For greater realism, I then estimate a two-sector extension with non-homothetic preferences, allowing sectoral composition to adjust endogenously while retaining regional differences in trade access and local fundamentals. Counterfactuals imply that external integration reduces spatial concentration on average, raises aggregate welfare, and modestly tilts within-country welfare gains toward peripheral regions. In a decomposition of 1990-2005 concentration changes, trade-cost and productivity changes account for a modest share of cross-country variation, while inferred amenity changes capture most of the remainder.
Cross-border housing markets have become more prevalent in Europe since the establishment of the European Union. Using data from the functional urban area of Luxembourg, we document significant floorspace price discontinuities at the borders of Luxembourg with Belgium, France, and Germany. Employing a quantitative spatial urban model and spatial regression discontinuity techniques, we show that differences in tax rates and tax importing account for 8% and 13% of the observed price jump, respectively. The remaining price discrepancy is explained by differences in productivity and amenities.
