Research
Job Market Paper
Optimal place-based industrial policy
Abstract In the presence of technological spillovers, should industrial policy target regions or maintain constant subsidies across space? While industrial policy has traditionally focused on uniform industry-wide subsidies, this paper argues that when industrial spillovers have a local component, heterogeneous regional targeting substantially outperforms the conventional approach. Using a general spatial model with multiple sectors, I show that optimal industrial subsidies should be higher in regions with a larger industrial base, even when spillover elasticities are constant across regions. This result reveals a new channel for place-based policies: local industrial subsidies highlighting the interaction between local spillovers and sectoral size. I quantify these effects in a calibrated model, finding that optimal heterogeneous targeting generates welfare gains of 1.6% compared to uniform subsidies across regions which increases welfare by a maximum of 0.9%.
Works in Progress
Geography, uncertainty, and the cost of climate change with Jordan-Rosenthal Kay
Abstract Uncertainty regarding the rise in global temperatures increases the expected welfare cost of climate change if the welfare function is convex in temperature. We focus on how the geography of the climate shock interacts with geographic adaptation forces (trade and migration) to determine the shape of welfare response to climate change. We demonstrate theoretically that adaptation forces dampen convexity in damage functions, but the strength of these adaptation forces depends on the spatial distribution of the climate shock. Integrating over different climate scenarios, uncertainty amplifies the welfare loss from climate change. The geography of welfare loss, incorporating climate uncertainty, concentrates previously unaccounted for excess losses in the developing world, alongside the United States and some regions in Europe. These excess damages are highly spatially correlated, because adaptation forces through trade and migration display a strong gravity relationship in the data.
Federal taxes in a spatial economy