Abstract: This paper presents theory and evidence on the role of environmental amenities in shaping the competitiveness of post-industrial cities. I assemble a rich database at a fine spatial scale to examine the impact of historical pollution on the distribution of skilled workers and residents within US metropolitan. I find that census tracts that are downwind to highly polluted historical industrial sites in the 1970s are associated with lower housing prices and a smaller share of skilled employment three decades later, a pattern which has been reinforced during 1980-2000. These findings suggest the presence of skill sorting on pollution and strong subsequent agglomeration effects. To quantify the contribution of different mechanisms, I build and estimate a multi-sector spatial equilibrium framework that introduces heterogeneity in local productivity and workers' valuation for local amenities across sectors, and allows the initial sorting to be magnified by production and residential externalities. The structural estimation suggests that historical pollution is associated with lower current productivity and amenity and the magnitudes are higher for productivity, more skilled sectors and central tracts. I then use the framework to evaluate the impact of counterfactual pollution cuts in different parts of cities on nationwide welfare and the cross-city skill distribution.
Travel Costs and Urban Employment Patterns: Evidence from China's High Speed Railway (Accepted at Journal of Urban Economics) Abstract: How does intercity passenger transportation shape urban employment and specialization patterns? To shed light on this question I study China's High Speed Railway (HSR), an unprecedentedly large-scale network that connected 81 cities from 2003 to 2014 with trains running at speeds over 200 km/h. Using a difference-in-differences approach, I find that an HSR connection increases city-wide passenger flows by 10% and employment by 7%. To deal with the issues of endogenous railway placement and simultaneous public investments accompanying HSR connection, I examine the impact of a city's market access changes purely driven by the HSR connection of other cities. The estimates suggest that HSR-induced expansion in market access increases urban employment with an elasticity between 2 and 2.5. Further evidence on sectoral employment suggests that industries with a higher reliance on nonroutine cognitive skills benefit more from HSR-induced market access to other cities.
Technology Transfer and Domestic Innovation:Evidence from the High-Speed Rail Sector in China joint with Yu Qin (NUS) and Zhuan Xie (Peking University) Covered by CEP's CentrePiece and LSE Business Review Abstract: This paper investigates China's high-speed railway (HSR) technology introduction to show how it spurs innovation in local regions and in relevant industries. The large-scale technology introduction, covering specific technology categories and directly benefiting railway-related firms from various cities, enables us to specifically depict how foreign technology is digested and spurs follow-up innovation in and out of directly receiving firms. We find that technology transfer leads to a 42% significant increase in HSR- related patents granted in cities with direct technology receivers. In addition, we also find evidence on sizable spillovers to firms that are not directly related to the railway industry, whereas technology similarity and the existence of relevant research institutions play important roles.
Where does the wind blow? Green preferences and spatial misallocation in the renewable energy sector Covered by LSE Business Review and RES Media Briefings Abstract: Are "greener" investments less efficient? This paper looks at the location choices of wind power investors. I measure the efficiency loss in this sector due to wrong project location and explore the factors contributing to it. Using extensive information on wind resources, transmission, electricity prices and other restrictions are relevant for the siting choices of wind farms, I calculate the predicted profitability of wind power projects for all the possible places across the contiguous US, use the distribution of this profitability as a counterfactual for profit-maximizing wind power investments and compare it to the actual placement of wind farms. The average predicted profit of wind projects would have risen by 47.1% had the 1770 current projects in the continental US been moved to the best 1770 sites. It is also shown that 80% and 42% respectively of this observed deviation can be accounted for by within-state and even within-county distortions. I show further evidence that a large proportion of the within-state spatial misallocation is attributable to green investors' “conspicuous generation" behaviour: wind farms in more environmentally-friendly counties are more likely to be financed by local and non-profit investors, are closer to cities, are much less responsive to local fundamentals and have worse performance ex-post. The implementation of state policies such as Renewable Portfolio Standard (RPS) and price-based subsidies are related to better within-state locational choices through attracting more for-profit investments to the “brown" counties, while lump-sum subsidies have the opposite or no effects. My findings have important implications for environmental and energy policy: policy makers should take account of the non-monetary incentives of renewable investors when determining the allocative efficiency of policies.