Many countries have used place-based policies to stimulate growth in lagging regions. We study Indonesia's Integrated Economic Development Zone (KAPET) program, which provided significant tax-breaks for firms locating in poorer districts in the Outer Islands. Along many dimensions, KAPET districts experienced no better development outcomes than their non-treated counterparts. The tax cuts neither encouraged greater firm entry, increased migration, nor raised local output. To investigate whether regional policies could have been redesigned to increase welfare and stimulate growth, we use a quantitative spatial model with multiple asymmetric regions, informal and formal sectors, costly trade, and costly migration.
Research in Progress
This paper studies the effects of capital city relocations on population growth, economic geography, and welfare, using the recent experience of Indonesia as a case study. We first benchmark effect sizes using a synthetic controls approach to study population growth in new capitals following relocations in Tanzania, Nigeria, and Kazakhstan. We then evaluate the welfare effects of Indonesia’s new capital city with a quantitative spatial equilibrium model. The model contains multiple sectors---including public sector employment---endogenous agglomeration and dispersion forces, and a transfer system to finance local public goods.
In 1968, John Kain proposed the Spatial Mismatch Hypothesis: the high unemployment rate in central cities among blacks might be due to the suburbanization of jobs combined with housing discrimination keeping blacks from relocating accordingly. We use in-person housing audit study, Housing Discrimination Study 2012, combined with rich job access data to directly test the role played by housing discrimination in the Spatial Mismatch Hypothesis. We find suggestive evidence for discriminatory steering in the housing market that denies Hispanics' access to jobs but no decisive evidence for other minorities.
Automobile travel in urban areas is associated with several negative externalities, including traffic congestion and pollution. Public transit systems provide transport alternatives that potentially reduce those negative externalities. We use several data sources to estimate how the opening of Jakarta's MRT in April 2019 improved traffic and air quality for city residents. To estimate how the MRT system alleviated congestion, we use high frequency data from Google Maps to compare changes in travel times for routes lying close to the MRT corridor to changes in travel times for planned but unbuilt MRT routes. We use a similar strategy to estimate the impact of the MRT system on pollution using remotely sensed pollution measures from the European Space Agency's Sentinel-5 Precursor (S5P) satellite. Finally, we compare our estimates of the benefits of reduced congestion and improved air quality to the costs of building and operating the MRT system.