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Essays on the Labor Market Effects of Place-Based Policies by Jesse

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Essays on the Labor Market Effects of Place-Based Policies by Jesse Essays on the Labor Market Effects of Place-Based Policies by Jesse McCune Gregory A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy (Economics) in The University of Michigan 2012 Doctoral Committee: Professor John Bound, Chair Professor Charles C. Brown Professor Narayan Sastry Assistant Professor Kevin M. Stange c Jesse McCune Gregory 2012 To Sashi, Ishwari, and Anuradha ii Acknowledgements This dissertation would not have been possible without the advice and support of my advisors, other mentors, coauthors, and family. I am especially grateful to my dissertation committee, John Bound, Charlie Brown, Narayan Sastry, and Kevin Stange for their guidance, time, and encourage- ment. Thank you to John and Charlie for encouraging me to pursue the projects that most interested me and for helping me to clarify my thinking at countless points along the way. Thank you to Narayan for invaluable assistance with acquiring the main data sources used in the first chapter of this dissertation, for coauthoring with me on our several Katrina-related papers, and for mentoring me throughout my time at Michigan. Thank you to Kevin for advice throughout my dissertation work, and in particular for conversations about structural methods during the early stages of the first and third chapters. I am also greatly indebted to my coauthors on the second chapter of this dissertation, Matias Busso and Patrick Kline, with whom I began working while they were students at Michigan. I have learned an enormous amount from Pat and Matias including the day in and day out focus required to see a research project to completion. Thank you to my professors at Kenyon College, in particular David Harrington and Will Melick, for sparking my initial interest in economics. Thomas Fraker, David Wittenburg, and Craig Thorn- ton all devoted far more energy to mentoring me than was required of them during my time at Mathematica Policy Research. Thank you to each of them for introducing me to the process of careful empirical research, for encouraging me to pursue a Ph.D. in Economics when I first ex- pressed interest, and for assisting me in the graduate school admissions process. Finally, I wish to thank my family. Thank you to my parents Helen and Jess for encouraging and supporting me. And most of all, thank you to my wife, Sashi, whose love and support allowed me to complete this dissertation and made these years in Ann Arbor much happier. iii Contents Dedication . ii Acknowledgements . iii List of Tables . vii List of Figures . vii Chapter 1: The Impact of Rebuilding Grants and Wage Subsidies on the Resettlement Choices of Hurricane Katrina Victims 1 Introduction . .1 I. Data . .4 II. U.S. Disaster Relief Policy and the Policy Response to Katrina . .5 III. Model . 11 IV. Model Parameterization and Estimation . 16 V. Identification . 20 VI. Parameter Estimates and Model Fit . 21 VII. Policy Simulations . 23 VIII. Conclusion . 29 Tables and Figures . 30 Appendix I: Imputing Home Repair Status . 52 Appendix II: Computing Housing-Related Price Variables . 53 Appendix III: Imputed Asset Distributions . 53 References . 55 Chapter 2: Assessing the Incidence and Efficiency of a Prominent Place Based Policy 59 Introduction . 59 I. The Empowerment Zone Program . 61 II. Model . 63 III. Empirical Strategy . 70 IV. Data . 73 V. Results . 78 VI. Robustness . 81 VII. Welfare Analysis . 83 VIII. Conclusion . 87 Tables and Figures . 89 Appendix Figures/Tables . 101 Appendix I: Methods . 105 Appendix II: Data . 106 iv Appendix III: Construction of Placebo Zones . 109 Supplemental Appendix . 110 References . 114 Chapter 3: Do Basketball Scoring Patterns Reflect Widespread Illegal Point Shaving? 118 Introduction . 118 I. A Stylized Model of Dynamic Competition . 121 II. Full Model . 124 III. Approximate Model Solution . 126 IV. Estimation . 128 V.Data . 130 VI. Structural Parameter Estimates . 131 VII. Dynamic Simulation . 132 VIII. Conclusion . 134 Tables and Figures . 136 References . 151 v List of Tables TABLE 1.1. HOUSEHOLD BACKGROUND CHARACTERISTICS . 31 TABLE 1.2. STORM DAMAGE AND RESOURCES AVAILABLE FOR REPAIRS . 32 TABLE 1.3. HOME SALES AND PARTICIPATION IN THE LOUISIANA ROAD HOME AMONG HOUSEHOLDS WITH SEVERELY DAMAGED . 33 TABLE 1.4. WAGE EQUATION . 34 TABLE 1.5. UTILITY FUNCTION AND BORROWING RATE PARAMETERS . 35 TABLE 1.6. MODEL FIT . 36 TABLE 1.7. THE IMPACT OF THE ROAD HOME PROGRAM ON HOUSEHOLDS’ RESETTLEMENT CHOICES . 37 TABLE 1.8. DECOMPOSITION OF THE ROAD HOME PROGRAM’S IMPACT ON HOUSEHOLDS’ RESETTLEMENT CHOICES AND HOUSEHOLDS’ WELFARE 38 TABLE 1.9. THE RELATIVE IMPACT OF DIRECT GRANTS AND SIMILARLY SIZED WAGE SUBSIDIES . 39 TABLE 1.10. THE DEADWEIGHT LOSS ASSOCIATED WITH A FLOW DISASTER- INSURANCE SUBSIDY . 40 TABLE 1.A1. CONSTRUCTING HOUSING-RELATED PRICE VARIABLES . 48 TABLE 1.A2. HOUSING PRICE INDEX REGRESSIONS . 49 TABLE 1.A3. DISTRIBUTION OF STORM DAMAGE BY FLOOD EXPOSURE . 50 TABLE 1.A4. POST-KATRINA POLICY TIMELINE . 51 TABLE 2.1. 1990 CHARACTERISTICS OF FIRST ROUND EMPOWERMENT ZONES 88 TABLE 2.2. TOTAL SPENDING . 89 TABLE 2.3. PRE-TREATMENT SAMPLE MEANS . 90 TABLE 2.4. WAGES AND JOBS IMPACTS . 91 TABLE 2.5. EMPLOYMENT IMPACTS . 92 TABLE 2.6. WAGE IMPACTS . 93 TABLE 2.7. HOUSING IMPACTS . 94 TABLE 2.8. POPULATION AND MOBILITY IMPACTS . 95 TABLE 2.9. ROBUSTNESS CHECKS . 96 TABLE 2.10. WELFARE ANALYSIS . 97 TABLE 2.A1. TREATMENT BY CITY . 100 TABLE 2.A2. SECOND MOMENTS IN 1990 TREATMENT AND CONTROLS . 101 TABLE 2.A3. ROBUSTNESS CHECKS . 102 TABLE 3.1. DESCRIPTIVE STATISTICS – GAMES . 135 TABLE 3.2. REGRESSION ANALYSIS OF THE POINT SPREAD’S PREDICTIVE ACCURACY . 135 TABLE 3.3. DESCRIPTIVE STATISTICS – POSSESSIONS . 136 vi TABLE 3.4. MAXIMUM LIKELIHOOD ESTIMATES OF STRUCTURAL PARAME- TERS BY POINT-SPREAD CATEGORY . 137 TABLE 3.5. COMPARISON OF EMPIRICAL AND PREDICTED MOMENTS . 138 TABLE 3.6. MEAN AND STANDARD DEVIATION OF FAVORITE’S HALFTIME LEAD BY POINT-SPREAD CATEGORY . 139 vii List of Figures FIGURE 1.1. REPAIR COSTS AMONG HOUSEHOLDS WITH INITIALLY UNIN- HABITABLE HOMES . 41 FIGURE 1.2. THE FINANCIAL INCENTIVE TO REBUILD ASSOCIATED WITH THE ROAD HOME PROGRAM . 42 FIGURE 1.3. TIMING OF HOME REPAIRS . 43 FIGURE 1.4. TIMING OF RETURNS TO NEW ORLEANS AND TO HOUSEHOLDS’ PRE-KATRINA HOMES . 44 FIGURE 1.5. CHANGES IN RELATIVE NEW ORLEANS WAGES FROM PRIOR TO KATRINA TO 2007/2008: BY OCCUPATION . 45 FIGURE 1.6. CHANGES IN RELATIVE NEW ORLEANS WAGES AFTER KATRINA BY OCCUPATION . 46 FIGURE1.7. SPATIAL WAGE ELASTICITIES IMPLIED BY THE ESTIMATED MODEL 47 FIGURE 2.1. MEANS BY YEAR AND TREATMENT STATUS . 98 FIGURE 2.2. JOBS, WAGES AND ESTABLISHMENTS . 99 FIGURE 2.A1. CHICAGO EMPOWERMENT ZONE . 103 FIGURE 2.A2. MEANS BY YEAR AND TREATMENT STATUS . 104 FIGURE 3.1. THE OPTIMAL CHOICE OF A MEAN-VARIANCE PAIR DURING STAGE 2 OF THE STYLIZED MODEL . 140 FIGURE 3.2. WINNING MARGINS WILL BE RIGHT SKEWED IF THE EXPECTED VALUE OF THE RELATIVE SCORE IN STAGE 2 IS A CONVEX FUNCTION OF THE RELATIVE SCORE FROM STAGE 1 . 141 FIGURE 3.3. WINNING MARGINS WILL BE LEFT SKEWED IF THE EXPECTED VALUE OF THE RELATIVE SCORE IN STAGE 2 IS A CONCAVE FUNCTION OF THE RELATIVE SCORE FROM STAGE 1.
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