We develop a dynamic life-cycle spatial equilibrium model with housing stock and a liquid asset under incomplete markets. The model captures the role of age, monetary and utility mobility frictions, credit constraints, city-specific housing supply elasticities and amenities. The features of the model are motivated by empirical evidence on the heterogeneous mobility patterns of different demographic groups. Individuals with lower ability to borrow, younger and non-homeowners move, on average, more. Instead, more able to borrow, younger and non-homeowners are more likely to move to “opportunity" than their respective counterparts. We calibrate the model to the 28 largest Canadian labor markets. We validate it by comparing the results with the empirical evidence above. We, then, perform counterfactual analysis in three dimensions. First, we compare sources of mobility restrictions, utility and monetary costs, and we find that utility moving costs matter quantitatively more than the monetary ones. When utility moving costs decrease by 10%, mobility rates almost double, but the share of individuals that move to “opportunity" decreases since move is less selective. Second, if unemployed agents in the Canadian “Rust Belt" were given moving vouchers, welfare in those cities would be 0.4% higher and most of it would come from individuals with low net worth. Third, if in Vancouver, housing regulations, such as zoning, were less stringent, welfare in the long-run would approximately 5% higher in Vancouver and 0.57% higher in the overall Canada.
Please register here to receive an e-mail with a Zoom link to attend the presentation.
This event is sponsored by the Dynamic Trade Institute. visit their website for more information.