Revise and resubmit
Access to high-quality local services constitutes an important amenity in residents’ valuation of cities. In this article, I examine consumer preferences for variety in nightlife to understand these preferences and their impact on nightlife industry dynamics. I develop a structural dynamic model for venue entry and exit in the nightlife industry and estimate the model using a panel of liquor license data from Chicago. I find strong preferences for variety. The results suggest that in equilibrium a new entrant can increase profits for incumbent venues in some cases due to increased demand. However, potential entrants face high barriers to entry.
Housing Appreciation and Supply in Monocentric Cities with Topography (with Joseph Williams and Tom Davidoff)
We revisit the celebrated relationship between buildable land and housing appreciation. A static model of a monocentric city surrounded by a constant fraction of buildable land at all radial distances is extended to a dynamic monocentric model with a variable fraction of buildable land. In equilibrium the rate of housing appreciation is proportional to the rate of urban sprawl. Both decrease with the fraction of buildable land at the expanding outer edge of the city. The rates of sprawl and price growth are greater with steeper price gradients from the core to the periphery. In a panel of U.S. metropolitan areas, housing appreciates more rapidly where buildable land decreases more rapidly with distance from downtown. Similarly, prices rise more rapidly in cities with steeper price gradients. We generalize models of land availability by adding a second parameter that governs the rate at which buildable land changes with distance from the center. Empirically, the estimated measure of marginal supply is less strongly correlated with demand factors than the estimated parameter that affects only average supply.
Homebuilding and the macroeconomy (with Luis Quintero)
We investigate the impact of increasing concentration in local residential construction markets on housing cycle dynamics. We show that the increase in concentration has led to greater unit price volatility, less production, and fewer vacant unsold units. Our results imply that the greater concentration has decreased the annual value of new housing production by $144 billion. Because housing is a determinant of the business cycle these findings provide further evidence that the secular decline in competitive intensity in the American economy is altering macroeconomic dynamics.
Welcome! We Have a New Menu: Measuring Product Responses to Competition (with Nathan Schiff)
This paper measures the response to new competition using a novel longitudinal dataset of restaurant menus in New York City. We use a technique from computer science to obtain a scalar measure of the pairwise distance between restaurants in product characteristic space based on differences in menu text. This particularly detailed measure of characteristic space allows for precise measurement of price and product changes in the menu of incumbent restaurants responding to entry. We address the endogeneity of location choice by matching “treated” incumbent restaurants facing competition from a new entrant with a “control” group of incumbent restaurants that have similar menus and location characteristics but no new competition. While we observe significant menu changes over our sample period, we do not find any evidence that restaurants facing competition respond by changing prices or product characteristics. We seek to provide some of the first evidence on the response to competition in markets with substantial product differentiation, many firms, and rapid turnover.
Price and differentiation responses to a minimum wage increase (with Nathan Schiff)
Redevelopment and housing prices (with Luis Quintero)