Andrii Parkhomenko
PhD Candidate in Economics | UAB - Barcelona GSE

Research Interests

Macroeconomics, Labor Economics, Economic Geography, Housing

Working Papers

The Rise of Housing Supply Regulation in the U.S.: Local Causes and Aggregate Implications (job market paper)

Regulatory restrictions on housing supply have been rising in recent decades in the U.S. and have become a major determinant of house prices. What are the implications of the rise in regulation for aggregate productivity, and for wage and house price dispersion across metropolitan areas? To answer this question, I build a general equilibrium model with multiple locations, heterogeneous workers and endogenous regulation. Regulation is decided by voting: renters want less regulation and owners want more. In locations with faster exogenous productivity growth, labor supply and house prices also grow more rapidly. Homeowners in these places vote for stricter regulation, which raises prices further and leads to greater price dispersion. High-skilled workers, being less sensitive to housing costs, sort into productive places, which leads to larger wage dispersion. That is, wage and house price differences are amplified by regulation choices.  To quantify this amplification effect, I calibrate the model to the U.S. economy and find that the rise in regulation accounts for 23% of the increase in wage dispersion and 85% of the increase in house price dispersion across metro areas from 1980 to 2007.  I find that if regulation had not increased, more workers would live in productive areas and output would be 2% higher. I also show that policy interventions that weaken incentives of local governments to restrict supply could reduce wage and house price dispersion, and boost productivity.

Key Words: housing supply regulation, productivity, wage inequality, house prices
JEL Classification: D72, E24, J31, R13, R31, R38, R52

Opportunity to Move: Macroeconomic Effects of Relocation Subsidies

The unemployment insurance system in the U.S. does not provide incentives to look for jobs outside local labor markets.  In this paper I introduce relocation subsidies as a supplement to unemployment benefits, and study their effects on unemployment, productivity and welfare.  I build a job search model with heterogeneous workers and multiple locations, in which migration is impeded by moving expenses, cross-location search frictions, borrowing constraints, and utility costs.  I calibrate the model to the U.S. economy, and then introduce a subsidy that reimburses a part of the moving expenses to the unemployed and is financed by labor income taxes.  During the Great Recession, a relocation subsidy that pays half of the moving expenses would lower unemployment rate by 0.36 percentage points (or 4.8%) and increase productivity by 1%.  Importantly, the subsidies cost nothing to the taxpayer: the additional spending on the subsidies is offset by the reduction in spending on unemployment benefits.  Unemployment insurance which combines unemployment benefits with relocation subsidies appears to be more effective than the insurance based on the benefits only.

Key Words: unemployment insurance, relocation subsidies and vouchers, local labor markets, moving costs, geographic mobility, internal migration
JEL Classification: E24, J61, J64, J65, R23

Media: NEP-DGE Blog

Managers and Productivity Differences, with Nezih Guner and Gustavo Ventura

We document that for a group of high-income countries (i) mean earnings of managers tend to grow faster than for non managers over the life cycle; (ii) the earnings growth of managers relative to non managers over the life cycle 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 parameterize this model with U.S. observations on managerial earnings, the size distribution of plants and macroeconomic aggregates.  We then quantify the relative 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.  Thus, observations on the relative earnings growth of managers become natural targets to discipline the level of distortions.  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 7% -- more than half of the observed gap between the U.S. and Italy.  We find that cross-country variation in distortions accounts for about 42% of the cross-country variation in output per worker gap with the U.S.

Key Words: cross-country income differences, managers, distortions, management practices, size distribution, skill investment
JEL Classification:
E23, E24, J24, M11, O43, O47

Media: VOX