Essays in Urban Economics

This dissertation analyzes and quantifies a subset of the benefits and costs associated with residential location decisions in the housing market, and how these benefits and costs can be altered through public policy. Chapter 1 motivates and previews how I, through three essays, empirically explore this topic. Chapter 2 focuses on the benefits that neighborhoods can provide to children. I investigate whether neighborhood exposures during childhood affect academic outcomes observed at the end of high school, and whether the effects can be explained by neighborhood schools. I find that neighborhood exposures during childhood affect high-stakes standardized exam scores, 12th grade GPA, the probability of intending to attend college and the probability of dropping out of high school. By leveraging variation in the age at which students move, I estimate exposure effects that encompass the effect of neighborhood schools and other amenities. I demonstrate that these effects cannot be fully explained by conventional school quality measures based on test scores or graduation rates, which points to the potential importance of peer effects and other neighborhood amenities as complementary mechanisms. In two interrelated essays, Chapters 3 and 4 quantify the costs of housing, and how these costs are impacted by changes to federal policy. Homeownership in the US has been supported via the mortgage-interest-deduction provision of the tax code. However, US tax policy was substantially changed with the Tax Cuts and Jobs Act (TCJA) of 2017, which, by doubling the standard deduction and capping state and local tax deductions, effectively made housing more expensive relative to other types of consumption. I estimate time-varying user-costs of housing and subsidies at a fine level of geography and show that the TCJA reduced the federal housing subsidy by over 80%. I document important heterogeneity in the impacts of the policy across racial and political lines. Finally, I show that increasing the current limit on deductions of state and local taxes would have small overall impacts on subsidies, with strongly heterogeneous effects.