Abstract: Growing spatial inequality has led policymakers to enact tax breaks to attract corporate investment and jobs to economically peripheral regions. We demonstrate the importance of multi-plant firms' physical capital structure for the take-up and efficacy of place-based policies by studying a national bonus depreciation scheme in Japan which altered the relative cost of capital across locations, offering high-tech manufacturers immediate cost deductions from their corporate income tax bill. Combining corporate balance sheets with a registry containing investment by plant location and asset type, we find the policy generated big gains in employment and investment in building construction and in machines at pre-existing production sites, with an implied fiscal cost per job created of $16,000. These responses are driven by smaller and younger firms, firms which rely on costly but long-lived capital inputs, and firms with a larger portion of their existing operations proximal to the policy catchment areas. We find limited evidence of local spillovers to ineligible plants or spillovers through iner-regional trade networks. For eligible firms, plant-level hiring in ineligible areas outstripped that in eligible areas, suggesting reallocation of resources within firms' internal capital and labor markets mitigates the spatial misallocation inherent in subsidizing low productivity areas.
Abstract: How governments should choose the frequency of payments has received little attention in the literature on the optimal design of benefits programs. We propose a simple model in which the government chooses the interval length between payments, subject to a tradeoff between costs of providing more frequent benefits and welfare gains from mitigating consumption non-smoothing. Using a high-frequency retail dataset that links consumers to their purchase history, we apply the model to the Japanese National Pension System. Our evidence suggests suboptimal intra-cycle consumption patterns, with negligible retailer price discrimination. Model calibrations support the worldwide prevalence of monthly payment systems.
Mobile Human Capital and Diffusion of Ideas Across Cities (draft available upon request)
Abstract: I study how the internal migration of inventors affects local and
aggregate growth through technological diffusion across cities. I
propose a quantitative spatial theory of growth and knowledge diffusion
through internal migration. My model highlights two mechanisms by
which productivity growth can be higher in one city than another:
(1) agglomeration forces and (2) knowledge inflows through internal
migration. Using data on U.S. cities, I find that denser cities have
benefited more from accessing technological knowledge from other cities,
and the effect of knowledge diffusion explains approximately 40 percent
of the spatial variation in productivity changes. I quantify the dynamic
effects of place-based policies and find that a reduction in migration
costs toward a small number of cities can improve aggregate efficiency
while reducing spatial disparities in productivity across cities.