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Title:Three papers in urban and regional economic and development
Author(s):Yu, Chenxi
Director of Research:Hewings, Geoffrey J.D.
Doctoral Committee Chair(s):Hewings, Geoffrey J.D.
Doctoral Committee Member(s):Feser, Edward; Lubotsky, Darren; McMillen, Daniel
Department / Program:Urban & Regional Planning
Discipline:Regional Planning
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):regional inequality
labor market outcome
wage externalities
Abstract:This dissertation presents three chapters that studies the regional evolution over time and how the local markets adapt to the changing environment. The first chapter focuses on the regional convergence or divergence debate. Current studies have provided conflicting evidences. The regression analysis study (Barro & Sala-i-Martin, 1992) finds evidence supporting regional convergence theory. While the distributional dynamic study (Quah, 1996) provides evidence to support club convergence theory. In this chapter, the finite mixture model is introduced as a new exploratory method to study the regional growth issue. This study finds the emergence of convergence clubs in the United States since the 1980s. The finite mixture normal model is used to identify the clubs based on the per capita personal income dataset for 700 U.S. labor market areas from 1969 to 2009. The results reveal that the collection of high income areas, termed the "rich places club," was formed in the 1980s, and the share of the rich places club stabilized at around 10-12% of total labor market areas for the 1990s and 2000s. We also find that the gap between the rich places club and the "everywhere else club" has been increasing since the 1990s. To better understand what is driving the formation of the convergence clubs found in chapter one, chapter two studies how expected labor demand shifter and natural amenities impact the local market. Traditionally, the local labor market literature focuses on price signals (wage and housing rent) and operates under a spatial equilibrium assumption, while the local economic development literature focuses on job creation, migration and operates under a spatial disequilibrium assumption. In this chapter, a united local economy framework is presented that links the local labor market and local economic development literatures and explores four aspects of local economy: wages, housing rent, job growth, and population growth. In the empirical section of this paper, two key factors, an expected labor demand shifter and appreciation of natural amenity, are investigated to show how they impact the four featured aspects of the local economy. From a local price perspective, as the expected labor demand increase, both wages and housing rents increase. The natural amenities do not significantly impact inter-regional wage difference, but natural amenities are a significant factor for inter-regional rent levels. From a job growth and a population growth perspective, a one unit job increase in expected labor demand growth will create more than one additional jobs (1.367-1.392). For every one unit increase of expected labor demand shifter, population will increase 0.8. Regions with higher amenities not only attract new population, they are also places where more jobs are created. This chapter provides evidence that the expected labor demand shifters (ELDS) and natural amenities could significantly impact local market outcome. Therefore, public policies can be draw up for different types of regions (type 1 high ELDS high amenities, type 2 high ELDS and low amenities, type 3 low ELDS and high amenities, type 4 low ELDS and low amenities). For type 1 regions, special attention should be paid to housing rent affordability, because both high ELDS and high natural amenities could drive up the housing rent. For type 2 region, human capital retention could be a challenging issue. For type 3 regions, public policy could focus on how to translate their desirable natural amenities into local, economic and social development. And for type 4 regions, while these regions are likely going to decline, it is very important to evaluate whether public policy should focus on bringing jobs to these regions or help people move out of these regions. The “rich places club” found in chapter one are usually places with larger population. Therefore, chapter three looks directly into the question: Why do people living in urban areas, especially large urban areas, receive higher wages? Based on the theory on agglomeration economies, labor market matching and knowledge spillover are considered to be two of the primary micro-foundations. Most empirical literature has found sizeable positive effects from labor market matching (Heuermann et al., 2010; Melo et al., 2009). However, there is far less consensus on the existence of knowledge spillovers. The reason for that is the difficulty in identifying knowledge spillover effects. The identification challenge comes from three directions: direction of causality (Duranton, 2006), the inability to distinguish imperfect substitution from externalities (Moretti, 2004), and sorting (Wheeler, 2001). Corresponding strategies are developed to ease the estimation biases. This study presents three major findings: first, from 2000 to 2011, the contribution of human capital externalities to productivity growth is at least three times the contribution of the labor market matching effect; secondly, this paper finds that higher skill groups experience higher human capital externality effects; third, the human capital externalities observed for the low skill group are more likely to be a migration sorting effect. This study also finds that younger workers are more likely to benefit from the labor market matching effect while older workers are more likely to benefit from the human capital externalities effect. Among younger workers, the group without a high school degree shows no gain from either human capital externalities or labor market matching effects. This group of low-skilled young adults should be the central focus for human capital policy. Meanwhile, older and highly educated workers seems to gain large benefits from both human capital externalities and labor market matching effects. This group of workers should be encouraged to work longer (Munnell & Sass, 2009). Further research should further examine the low-skilled young adult group. Is there a strong inflow of immigrants that could be impacting this group? Are white and non-white, low-skilled younger adult labor market performance similar or different? Is there a gender performance difference in the low-skilled young adult group? Looking deeper into these issues can help form better policy to help this segment of the labor market.
Issue Date:2017-04-17
Rights Information:Copyright Chenxi Yu 2017
Date Available in IDEALS:2017-08-10
Date Deposited:2017-05

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