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"Road Infrastructure and Retail Markets", JMP (Micro), revise and resubmit,
Economic Inquiry.
[Abstract]
Abstract: This paper explores the impact of transportation infrastructure on U.S. retail markets and leverages historical variation in transportation networks. Using detailed scanner data, I examine how interstate highways affect consumer welfare. The analysis shows that interstate highways reduce prices and expenditures on retail goods while improving product quality. They also expand both the supply of unique products in stores and the variety of goods consumers purchase. A one percent increase in highway stocks lowers the CES retail price index by about 0.14 percent. Welfare gains are positive across all income groups but roughly twice as large for higher-income consumers. Accounting for construction and maintenance costs, counterfactual welfare analyses indicate that additional interstate highways enhance consumer welfare.
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"Redistribution Through Market Power: Monetary and Fiscal Transmission", JMP (Macro).
[Abstract]
Abstract: Markups determine whether a policy impulse reaches households as wages or as profits, and the two are received by households with different propensities to consume. I embed a calibrated heterogeneous-firm markup block in a heterogeneous-agent New Keynesian model and vary market power over a range spanning economy-wide markup estimates, with the firm distribution disciplined by manufacturing data. Higher market power weakens fiscal policy, since a spending shock generates less wage income as the labor share falls. Rate cuts instead generate larger equity revaluations that accrue to low-propensity households, so output changes little while incidence shifts toward the wealthy. Under imposed ownership, market power operates mainly through the size of the revaluation. When liquid-versus-illiquid exposure is endogenous, the propensity gap widens in the same direction. A rate cut raises top and bottom quintile consumption almost equally at low market power; at high market power the top gains twice as much.
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"Regional Price Indexes and Stimulus Payments Allocation", reject and resubmit,
Journal of Economic Geography.
Media: SC EPIC Policy Brief
[Abstract]
Abstract: In this paper, I develop regional and income group-specific price indexes by estimating demand functions derived from a model of consumer choice with non-homothetic preferences using detailed barcode-level and household survey data. To illustrate the importance of differences in the cost of living across US households on the real impacts of the federal tax and transfer system, this paper examines a counterfactual policy that adjusts the 2020 stimulus payments based on regional and household group-specific price indices. The results reveal significant variation in the real impact of stimulus payments. For example, to have the same real impact, the nominal value of a stimulus payment to a household in California would need to be about two and a half times the amount as a payment to a household with the same income but living in Arkansas.
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"Uniform Brand Variant Pricing and Cost Pass-Through to Retail Prices", with Danna Thomas (under review).
[Abstract]
Abstract: We show that price uniformity is prevalent within stores and across products of the same brand, termed uniform brand variant pricing. We then examine how this behavior affects input cost shifting to retail prices across four product groups, estimating pass-through regressions via instrumental variables. In each case study, we find that input cost pass-through is effectively identical across brand variants, regardless of whether a given variant contains the input.
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"Local Market Power, Ownership, and the Incidence of Fiscal Policy".
[Abstract]
Abstract: Firms with local market power charge markups that differ across cities, so the same goods cost more in some places than in others. This paper asks who bears those markups, who receives the revenue, and whether fiscal policy can offset the difference. I add spatially varying markups to an estimated spatial equilibrium model with heterogeneous households. Households pay markups in proportion to what they buy but receive the profits in proportion to what they own, and ownership is far more concentrated than earnings. The result is a transfer of $14 billion a year from non-college to college households in the United States, four times the deadweight loss of the federal income tax and running the other way. Assuming instead that profits track wages, as is standard, leaves the aggregate cost of markups unchanged but reverses who gains from removing them. Almost all of the spatial variation in goods prices survives conditioning on local rents, wages and population, so place-based policies cannot target this burden.
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"Tax Multipliers in a DSGE Model", with Jason DeBacker.
[Abstract]
Abstract: Consumption taxes have long been favored by tax economists for their relative efficiency compared with taxes on capital and labor. This paper examines the stabilization properties of tax cuts within a DSGE framework. In addition to consumption taxes, the model incorporates other tax instruments, including investment tax credits and changes to expensing and depreciation policies. We provide the first quantitative insights into the size of the multipliers associated with tax cuts that directly target consumption and investment. (Preliminary. Project status: expanding the model.)
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"Investment Tax Incentives in a Production Network", with Jason DeBacker.
[Abstract]
Abstract: We embed an investment tax credit, bonus depreciation, and a capital income tax in a 55-sector New Keynesian model where capital goods are produced by identifiable sectors. The multiplier on a sector-specific credit splits exactly into the output it buys and the revenue it costs, and the two halves have different determinants. The revenue cost is nearly a deterministic function of the sector's tax depreciation rate, which we characterize analytically. The output return is ordered by position in the investment network rather than by the tax code: credits aimed at capital-goods producers deliver the least output. Bonus depreciation is targeted by asset class, so it selects on what a credit costs and is uninformative about what it produces. Measuring the capital-goods bundle through the network also attenuates every aggregate multiplier, and the tax on capital returns most.
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"Investment Tax Incentives and Household Heterogeneity", with Jason DeBacker.
[Abstract]
Abstract: An investment tax incentive splits into two income flows with opposite incidence: it pays wages to the households that produce capital goods, whose marginal propensity to consume is high, and it raises the value of the firms that own capital, held by households whose propensity is near zero. A representative agent averages the two and cannot tell them apart. We embed a recursive tax-depreciation block in a heterogeneous-agent New Keynesian model and separate the flows by redistributing the capital-gains component of a policy across households, holding every aggregate fixed. This yields an exact decomposition of the effect of heterogeneity into an amplification term and an ownership term. Instruments order by the share of their incidence that is ownership rather than demand, and for the investment tax credit ownership offsets much of the amplification, by an amount that rises with the capital-goods rent share.
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"Mobile Internet Growth and Services Trade" with
William Hauk and
Mohammad Jakaria.
[Abstract]
Abstract: This article studies how internet connectivity, through overall internet use and mobile internet access, affects international trade, with a focus on services. Using data for over 100 countries from 2004 to 2019, we estimate a two-stage structural gravity model linking digital infrastructure to bilateral trade flows. A 10 percent rise in internet use in the importing country raises bilateral services trade by approximately 7 percent, with comparable effects on the exporter side. The strongest responses occur in telecommunications, information technology, finance, and intellectual property services, while the effects on goods trade are modest. Mobile broadband coverage produces similar but somewhat smaller impacts: 2G-and-higher and 3G-and-higher networks both yield positive and significant elasticities, particularly in bandwidth-intensive sectors. These results suggest that expanding both fixed and mobile internet access lowers trade costs and broadens participation in global markets.