Estimating differences in amenity-adjusted real earnings across cities (Job Market Paper)
Abstract: Measures of intercity wage differentials play an important role in research. For some purposes amenity adjusted real wage differentials are needed because they are the basis for migration and interregional labor market equilibrium. Current methods for measuring these amenity-adjusted differentials involve estimating an expanded Mincer equation for all workers which assumes both that current estimates of amenity and prices are adequate and that preferences do not vary across different household types. This paper proposes an alternative method for estimating amenity-adjusted real wage differentials that is robust to problems in estimating city differences in amenity and prices. It also adjusts for differences in preferences across household types. Testing indicates that the proposed method provides superior power in explaining differences in intercity real wage differentials.
A New Approach to Measuring Intercity Differences in Housing Costs (with Nathaniel Harris), SSRN Working Paper [Here]
Abstract: Intercity housing price indexes that rely on median house price or pooled hedonic regressions adjust imperfectly for differences in housing characteristics. Single equation hedonic methods produce estimates of intercity differences that vary substantially with the specific cities in the regression, the sample sizes from each city, and/or the housing characteristics used. To mitigate these shortcomings, we create intercity housing price indexes for both rental and asset prices, which is a Fisher Ideal aggregation of a two-way Blinder-Oaxaca decomposition, the FIBO index. Our method improves upon current house price indexes because it is far less influenced by the cities studied, sample sizes from each city, and housing characteristics included. We also find, as predicted by Carrillo and Yezer (2021), that asset prices substantially overstate variation in rental prices across cities.
Work in Progress
Monopsony Power and Interregional Wage Differentials
Abstract: Recent studies have found evidence that labor supply elasticity to firms in some areas is not perfectly elastic which suggests the potential that local firms have monopsony power. Workers in labor markets where firms have monopsony power are paid less than those in other locations where markets are perfectly competitive. The problem with conducting direct tests for lower wages is that living cost and amenities also cause wage differentials. This paper takes a different approach to testing for monopsony. The difficulty is resolved here by deflating wages using earnings of otherwise similar workers who are not subject to monopsony because their employment is highly diverse. The results show that appropriate occupation matching is an efficient way of accounting for the effect of amenities and cost of living on wages, allowing for analysis of the possible effects of potential monopsony power across areas on interregional wage differentials for a particular occupation.
Labor Market Segmentation, and Resource Misallocation (with Jin Ho Kim)
Abstract: Using Korean Labor and Income Panel Study (1998-2017) data, we first show that wages are the most crucial determinant for the individuals’ preference over employment type. Then, we calculate inequality measures using counterfactual wages over different labor market segments estimated for each individual. We term these measures as the degree of labor market segmentation (DLMS) that each individual faces. We study the relationship between the DLMS and resource allocation. We find that the DLMS is positively related to money spent on private education, and time spent as non-employed. The DLMS is negatively associated with marital status and the number of children among married couples. We conclude that increased labor market segmentation leads workers to invest substantial amount of resources into career advancement.
Informal Sector Heterogeneity by Gender (with Jin Ho Kim)
The effect of teleworkability on labor market outcome during the COVID-19 pandemic (with Koangsung Choi, Francesco Renna and Chung Choe)