Abstract: Education and labor mobility are key drivers in the production of human capital, fundamental to economic development. In the U.S., the varying skill production efficiencies of state-specific education systems and the dynamics of worker migration shape human capital of states, influencing economic outcomes at both the state and national levels. This paper develops a novel dynamic spatial general equilibrium model with overlapping generation framework in which heterogeneous individuals accumulate human capital and move across states. Calibrated to the U.S. economy, the model illustrates how variations in education efficiency lead to substantial crossstate income disparities and shows that internal migration can notably boost output in states with lower education efficiencies. At the national level, free mobility of workers yields a 6.9% output gain. Moreover, the model suggests that variations in human capital account for 46.6% of the state variation per capita output. Applying the calibrated model to analyze the Obama Administration’s Race to the Top initiative finds that the $4.1 billion grant spurred a 0.2% increase in U.S. GDP, mostly benefiting the grant-winning states and their neighbors. Additionally, alternative grant allocation experiments show that strategic reallocation of education grants, considering state skill production efficiencies, could further increase national GDP gains without necessarily worsening state income disparities.

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Abstract: The purpose of this note is to update an ancient controversy over the comparison between discrete and continuous agent models of land use and agent location in urban economics.  Berliant (1985) shows that that the following statement is self-contradictory: “There is a continuum of agents, each of whom owns or is endowed with a positive Lebesgue measure of land.”  A corollary follows: “As the number of agents tends to infinity, the set of agents who own a positive Lebesgue measure of land shrinks to measure zero.”  The basic question is this: Under what circumstances can the discrete agent model be used to justify the continuous agent model in the sense that the equilibria of the logically consistent discrete agent model are close to those of the logically inconsistent continuous agent model? In other words, under what circumstances can the two models be reconciled? They can be reconciled exactly when commuting cost tends to zero at a rate inversely proportional to population size.

Abstract: Do central slums provide essential economic and social benefits to the poor? We collected bespoke data for 5,000 households to study mass forced clearances in Addis Ababa. Evictees were offered alternative subsidized housing further from the center. Exploiting sharp clearance zone boundaries, regression-discontinuity estimates show negative impacts on social networks, but positive impacts on work, earnings, housing quality and environmental amenity. Relocating households close to their ex-ante neighbors eliminates social costs. Slums are not essential: relocation policies can be designed to fully compensate residents, and the sale value of cleared land more than covers the cost.