https://macropaperwarehouse.com/authors/diego-daruich/Diego DaruichHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/an-equilibrium-analysis-of-the-effects-of-neighborhood-based-interventions-on-children/https://macropaperwarehouse.com/papers/an-equilibrium-analysis-of-the-effects-of-neighborhood-based-interventions-on-children/<p><strong>Research question.</strong> How should governments design neighborhood-based policies to improve long-run outcomes for children, once one accounts for general equilibrium (GE) forces—endogenous rents, neighborhood quality, wages, and distortionary taxation—that small-scale experimental studies cannot identify?</p> <p><strong>Model.</strong> The paper embeds neighborhood effects into a quantitative, heterogeneous-agent overlapping-generations (OLG) model with endogenous location choice and child skill development. The economy has three building blocks: (1) a dynastic life-cycle structure in which parents choose a neighborhood (from two options: a disadvantaged n=1 and an advantaged n=2) and allocate time to child development, with child skills produced by a nested CES aggregator combining parental time and neighborhood quality (proxied by per-capita income in the tract); (2) a GE Aiyagari incomplete-markets framework with endogenous labor supply, wage uncertainty, and progressive labor taxation; and (3) a government that finances housing vouchers or place-based wage subsidies by adjusting the labor income tax parameter, with all additional net expenses fully offset by tax revenue. Housing supply is upward-sloping (elasticity 1.75, from Saiz 2010), so rents are endogenous.</p>https://macropaperwarehouse.com/papers/the-macroeconomic-consequences-of-early-childhood-development-policies/https://macropaperwarehouse.com/papers/the-macroeconomic-consequences-of-early-childhood-development-policies/<p>This paper embeds early childhood development (ECD) investment into a general-equilibrium (GE), heterogeneous-agent, overlapping-generations model calibrated to U.S. data in order to quantify the aggregate and distributional consequences of large-scale, universal government ECD programs. The central finding is that a universal program spending $13,500 per child-year on children aged 0–3 — the same level as a well-studied North Carolina randomized controlled trial — generates long-run welfare gains of 12.7% in consumption-equivalent units for newborns under the veil of ignorance, income growth of 10.6%, an intergenerational mobility increase of 28.2% (roughly half the US–Canada gap), and a lifetime-earnings inequality reduction of 2.0% (roughly half the US–Germany gap). The key mechanism is dynastic: investing in a child today not only raises that child&rsquo;s own skills and income but creates a better parental background — in terms of skills, assets, and education — for the next generation, so that more than two-thirds of the welfare gains accrue through this intergenerational channel rather than from the direct effect on the intervened generation. General equilibrium compresses the college wage premium and reduces welfare gains by approximately one-third relative to partial-equilibrium projections, but the policy remains self-financing in the long run. The model is validated against the first- and second-generation experimental evidence from Garcia et al. (2020, 2024), replicating both the 15 p.p. college graduation rate increase and the 1.54 lifetime income return per dollar spent that those RCTs documented.</p>