Homeownership, Polarization, and Inequality

This paper asks why job polarization and income inequality are higher in large U.S. cities, and proposes a novel housing-market mechanism that operates independently of — but interacts with — the skill-biased technical change (SBTC) explanations dominant in the existing literature.

The core argument is that large cities have experienced faster growth in house prices relative to both wages (price-wage ratio) and rents (price-rent ratio) since 1980. This excess price growth has priced middle-income households out of homeownership in expensive cities. Because low-income households cannot afford to own anywhere and high-income households can afford to own everywhere, it is specifically middle-income (middle-skilled) households whose location choice becomes entangled with their tenure choice. These households increasingly sort toward smaller, more affordable cities where they can purchase a home. This selective out-migration hollows out the middle of the income distribution in large cities, producing greater employment polarization and income inequality there.

Spatial Implications of Telecommuting

Delventhal and Parkhomenko build a quantitative spatial model of the United States to study how the rise of telecommuting reshapes the distribution of residents, jobs, and housing costs across and within cities. The model divides the continental U.S. into 4,502 locations (defined as intersections of Census PUMAs and counties) and allows each worker to choose any residence-job pair. Workers differ by education (college vs. non-college) and occupation type (telecommutable vs. non-telecommutable). Telecommutable workers can split labor time between on-site and remote work; their remote-work intensity responds endogenously to relative remote productivity, a work-from-home aversion parameter, home floorspace costs, and commute time.

Andrii Parkhomenko | Macro Paper Warehouse

Homeownership, Polarization, and Inequality

Spatial Implications of Telecommuting