Spatial Economics, Urban Economics, Macroeconomics, Housing
- Spatial Implications of Telecommuting, by Matt Delventhal and Andrii Parkhomenko (March 2023)
We build a quantitative spatial model in which some workers can substitute on-site effort with work done from home. Ability and propensity to telecommute vary by education and industry. We quantify our framework to match the distribution of jobs and residents across 4,502 U.S. locations. Then we simulate a permanent increase in the attractiveness of telework that leads to greater adoption of hybrid and fully remote work. To validate our model, we show that our simulation robustly predicts local changes in residents and housing prices observed 2019–2022. The rise of telework results in a rich non-monotonic pattern of reallocations of residents and jobs within and across cities. Workers who can telecommute experience welfare gains, and those who cannot suffer losses. Broader access to jobs reduces wage inequality across residential locations, and heralds a partial reversal in the spatial concentration of talent and spending power known as the "Great Divergence."
Earlier version appears in: CEPR Covid Economics, Vetted and Real-Time Papers, issue 61
Media: LA Times, The Conversation, Skift, Fast Company, WalletHub
- Homeownership, Polarization, and Inequality, by Andrii Parkhomenko (November 2022)
Revise & resubmit at the Review of Economic Studies
The rise of income inequality and job polarization have been more pronounced in large U.S. cities. I offer a new explanation: when price-rent and price-wage ratios grow faster in large cities, middle-income households increasingly cannot afford to own a house there. They move to smaller cities and the middle of the income distribution in large cities hollows out, making them more polarized and unequal. I document that (1) commuting zones with higher price growth experienced larger polarization and increase in inequality since 1980 and (2) middle-income households migrate more often to cheaper states for housing-related reasons than low- or high-income households. Using a quantitative spatial equilibrium model with tenure choice and skill heterogeneity, I find that disproportionate growth of prices relative to incomes and rents in large cities accounts for about one-half of the gap in inequality growth and polarization between large and small cities.
- Faster, Taller, Better: Transit Improvements and Land Use Policies, by Liming Chen, Rana Hasan, Yi Jiang, and Andrii Parkhomenko (October 2023)
We study the interaction between transit improvements and land use policies, an issue of growing policy importance. Bengaluru, one of the India's largest cities, inaugurated a metro system in 2011 but has extremely low building heights, even near metro stations. We build a rich dataset and a quantitative spatial model where heterogeneous workers choose among different commuting modes. We find that the metro increases citywide output and welfare, even net of costs. However, the net gains are several times larger when height limits are relaxed near stations (transit-oriented development). Moreover, transit-oriented development and construction of the metro are complementary policies.
- Local Causes and Aggregate Implications of Land Use Regulation, by Andrii Parkhomenko
Journal of Urban Economics, 138, 2023: 103605
I study why some cities have strict land use regulation, how regulation affects the U.S. economy, and how policymakers can mitigate its negative consequences. I develop a quantitative spatial equilibrium model where local regulation is determined endogenously, by voting. Homeowners in productive cities with attractive amenities vote for strict regulation. The model accounts for 40% of the observed differences in regulation across cities. Quantitative experiments show that excessive local regulation reduces aggregate productivity, but not necessarily welfare because, unlike renters, homeowners benefit from regulation. I propose federal policies that raise productivity and welfare by weakening incentives to regulate land use.
Media: New York Times, Marginal Revolution, Noahpinion
Awards: Kraks Fond prize for the Best Student Paper at the 7th European Meeting of the Urban Economics Association, Copenhagen 2017
- Work from Home and Urban Structure by Matt Delventhal, Eunjee Kwon, and Andrii Parkhomenko
Built Environment, 49(3), 2023: 503-524
The sustained increase in working from home in the wake of Covid has the potential to reshape the US urban landscape. This article describes the big picture of pre-2020 remote work in the US and summarizes how that picture changed during the subsequent three years. It then introduces a mathematical model designed to calculate the possible long-run impacts of increased remote work on where and how Americans work and live. This model predicts that the increased prevalence of remote and hybrid work arrangements will induce workers with remote-capable jobs to find housing farther away from their job locations, increasing the length of the average commute while cutting the time actually spent commuting. Jobs that produce goods and services which must be consumed locally will follow the bulk of the population to suburbs and smaller cities, while jobs producing tradable output will increase both in low-cost and high-productivity locations, at the expense of the middle. In the long run, the reallocation of demand to lower density locations with fewer legal restrictions on housing development should reduce the real price of housing by at least 1 per cent, but these changes depend on adjustments to the housing stock, both through new construction and through re-purposing commercial real estate in city centres. The model predicts a partial reversal of the decades-long concentration of talent and income in the centres of the biggest cities. Data on changes 2019-2022 suggest that some of this reversal is already happening.
- JUE Insight: How Do Cities Change When We Work from Home? by Matt Delventhal, Eunjee Kwon, and Andrii Parkhomenko
Journal of Urban Economics, 127, 2022: 103331
How would the shape of our cities change if there were a permanent increase in working from home? We study this question using a quantitative model of the Los Angeles metropolitan area featuring local agglomeration externalities and endogenous traffic congestion. We find three important effects: (1) Jobs move to the core of the city, while residents move to the periphery. (2) Traffic congestion eases and travel times drop. (3) Average real estate prices fall, with declines in core locations and increases in the periphery. Workers who are able to switch to telecommuting enjoy large welfare gains by saving commute time and moving to more affordable neighborhoods. Workers who continue to work on-site enjoy modest welfare gains due to lower commute times, improved access to jobs, and the fall in average real estate prices.
Media: LA Times, Time magazine, The Conversation, USC Tommy Talks, USC News, Academic Times, Skift, Fast Company, Spectrum News (21:47)
- Managers and Productivity Differences, by Nezih Guner, Andrii Parkhomenko, and Gustavo Ventura
Review of Economic Dynamics 29, 2018: 256-282
We document that for a group of high-income countries the life-cycle earnings growth of managers relative to non-managers is positively correlated with output per worker. We interpret this evidence through the lens of an equilibrium life-cycle, span-of-control model where managers invest in their skills. We use the model to quantify the importance of exogenous productivity differences and the size-dependent distortions emphasized in the misallocation literature. Our findings indicate that such distortions are critical to generate the observed differences in the growth of relative managerial earnings across countries. Distortions that halve the growth of relative managerial earnings, a move from the U.S. to Italy in our data, lead to a reduction in managerial quality of 27% and to a reduction in output of about nearly 7% – more than half of the observed gap between the U.S. and Italy. Cross-country variation in distortions accounts for about 42% of the cross-country variation in output per worker gap with the U.S.
Selected Work in Progress
- Skill Allocation and Urban Amenities in the Developing World, by Jorge De la Roca, Andrii Parkhomenko, and Daniel Velásquez
- Differences in Time Use across Cities, by Seongmoon Cho and Andrii Parkhomenko
Policy and Other Non-Peer Reviewed Publications
- Remote Opportunities for Scholars in Ukraine, by Karishma Chhugani, Alina Frolova, Yuriy Salyha, Andrada Fiscutean, Oksana Zlenko, Sanita Reinsone, Walter W. Wolfsberger, Oleksandra V. Ivashchenko, Megi Maci, Dmytro Dziuba, Andrii Parkhomenko, Eric Bortz, Fyodor Kondrashov, Paweł P. Łabaj, Veronika Romero, Jakub Hlávka, Taras K. Oleksyk, Serghei Mangul
Science (letter), 378(6626), 2022: 1285
- Accelerating Urban Economic Growth in Ukraine, by Richard Green, Vernon Henderson, Matthew Kahn, Alex Nikolsko-Rzhevskyy, and Andrii Parkhomenko
Rebuilding Ukraine: Principles and Policies, CEPR Press, 2022
- Zoning and the Density of Urban Development, by Matt Delventhal, Eunjee Kwon, and Andrii Parkhomenko
Pacific Southwest Region UTC Research Report, 2020
Inactive Working Papers
- Opportunity to Move: Macroeconomic Effects of Relocation Subsidies, by Andrii Parkhomenko