Essays on the Labor Market Effects of Place-Based Policies.

Abstract

Following Hurricane Katrina, the Louisiana Road Home program provided cash rebuilding grants directly to individual homeowners. In chapter 1, I develop a dynamic discrete choice model of New Orleans homeowners' post-Katrina choices regarding residential locations, home repairs, home sales, and amounts to borrow or save, and I derive and implement a maximum likelihood estimator for the model's structural parameters. Using simulations I find that the Road Home program significantly increased the fraction of homes rebuilt within four years of Katrina, mostly by relaxing financing constraints for borrowing constrained households who would have strongly preferred to rebuild even in the absence of a subsidy if the associated costs could have been spread out over time. I find that location preferences are highly heterogeneous, and most households are far enough from the margin with respect to their preferred location that even large location subsidies induce few households to change locations. These findings suggest that disaster-related subsidies to dangerous locations generate substantially smaller economic distortions than would be predicted by spatial equilibrium models with homogeneous agents.

Chapter two empirically assesses the incidence and efficiency of Round I of the federal urban Empowerment Zone (EZ) program using confidential microdata from the Decennial Census and the Longitudinal Business Database. Using rejected and future applicants to the EZ program as controls, we find that EZ designation substantially increased employment in zone neighborhoods and generated wage increases for local workers without corresponding increases in population or the local cost of living. The results suggest the efficiency costs of first Round EZs were relatively modest.

The third chapter reassesses the findings of previous research (Wolfers, 2006) that interpreted right-skewness in the distribution of favorites' winning margins as evidence of pervasive point shaving in college basketball. I estimate a structural model of dynamic competition using first-half play-by-play data from college games and simulate the estimated model's predicted distribution of winning margins. Teams' optimal strategies generate patterns that match those previously cited as evidence of point shaving. The results suggest that indirect forensic economics methodology can be sensitive to seemingly innocuous institutional features.