Essays on Urban Economics
- Kole, Kyle
- Advisor(s): Brueckner, Jan K
This dissertation consists of three essays on urban economics. The first essay applies the concept of agglomeration economies to the firm using a theoretical model of worker interaction. Next, the second essay takes an empirical approach to evaluate the efficacy of the Section 8 Housing Choice Voucher program, the largest housing program in the United States of America, in addressing residential crowding across the nation. Finally, the third essay empirically investigates the effect of grocery stores on property values by analyzing the effects of the Food Retail Expansion to Support Health program in New York City. Each essay's conclusion comments on amenities and what influences them. The first essay sheds light on why a firm would want to invest in its social infrastructure even if socializing is not directly related to productivity. Technological agglomeration economies are one reason for the existence of big cities, a common example being "cross-fertilization" that occurs when workers of different firms interact with each other. This "cross-fertilization" could be applied to workers in a specific firm, presenting a reason for a firm to invest in socializing at the workplace. A theoretical model of worker interaction shows that the socially optimal level of socializing is risk dominated by lower levels of socializing, even when socializing is beneficial for productivity. A profit maximizing firm recognizes the benefits to productivity and would prefer its workers to socialize more, at the socially optimal level. Hence, greater profits from increased productivity drive the incentive for a profit maximizing firm to invest in the work environment.
The second essay evaluates the effectiveness of the Section 8 Housing Choice Voucher program in tackling the problem of residential crowding. Prior research shows that expanding the Section 8 Housing Choice Voucher program has varying price effects on different parts of the rental housing market. While recipients will certainly benefit from the added vouchers, there is ambiguity in the impacts on quality of life for non-recipients in the broader housing market. Excessive crowding in homes, dubbed overcrowding, is one measure of quality of life because overcrowding can lead to adverse outcomes such as stunted child development, adverse mental health, and an increased risk in spreading infectious diseases such as COVID-19. This paper makes use of an exogenous increase in the supply of Section 8 housing vouchers in a panel setting to ascertain the effectiveness of a program provided at the federal level in tackling housing overcrowding throughout the nation. Estimation of a linear probability model shows that adding vouchers reduces the incidence of overcrowding: a 10% increase in the supply of vouchers reduces the likelihood that a housing unit is overcrowded by 0.081 percentage points. The mechanism behind the effect is shown to correspond with anecdotes about overcrowding: households experiencing misfortune, financial difficulties, or other tenuous circumstances double-up with higher-income households. Hence, a voucher enables the troubled household to move into more suitable living arrangements.
The third essay explores the Whole Foods Effect. The effect of grocery stores on property values is difficult to establish because of the endogeneity between where people choose to live and where grocery stores choose to operate. This paper is the first to establish that nearby grocery stores are local amenities, leading to higher property values, by using the Food Retail Expansion to Support Health (FRESH) program in New York City. On average, a residential property located near a new grocery store experiences a 7.94% increase in value. An exploration of mechanisms indicates that opening more grocery stores not only contributes a direct effect to the increase in property values through an improvement of local amenities, but that it also attracts and sustains complementary businesses such as restaurants, thereby leading to a further increase in property values through an indirect improvement of local amenities.