The Macroeconomics Seminar:
Time: 12:15 pm – 13:30 pm
Date: 17th of January 2023

Room 3001

Suzanne Bellue (University of Mannheim) “Why Don’t Poor Families Move? A Spatial Equilibrium Anaylsis of Parental Decisions with Social Learning”

Abstract : “: In the United States, childhood neighborhood quality shapes adulthood economic opportunities. However, most children raised in bottom-quality neighborhoods still live in low-quality neighborhoods in adulthood. Could childhood neighborhood directly affect adulthood choices? I develop a quantitative spatial model of parental decisions that incorporates a novel mechanism: social learning about the technology of skill for-mation. Segregation generates information frictions that systematically distort parents’ subjective beliefs and behavior. I calibrate the model using several United States representative datasets. The calibrated model matches targeted and non-targeted parental behavior and generates an endogenous distribution of subjective beliefs. I find a relatively modest level of delusion that increases the income Gini index by 3% and the intergenerational rank-rank slope by 12%. A housing voucher policy improves the neighborhood quality of eligible families, raising children’s future earnings. When scaling up the policy, long-run and general equilibrium responses in subjective beliefs amplify the policy effects. Inequality reduces, and intergenerational mobility improves. ”

Sponsors:
CREST