Frictional Sorting

Wenquan Liang (), Ran Song and Christopher Timmins

No 27643, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In many countries around the world, migration costs and housing supply restrictions interact with each other and combine to restrict workers’ location decisions. Using an equilibrium sorting model and rich micro data from China, we evaluate the impacts of these dual constraints on workers’ sorting behavior and quantify the resulting changes in aggregate welfare and inequality. We find strong policy interactions between the two kinds of frictions in determining welfare losses and regional inequality. Counterfactual simulations show that lowering migration costs can increase welfare and reduce regional inequality by moving workers from unproductive inland regions to productive coastal regions in China; such welfare and regional distributional impacts depend on the elasticity of housing supply in coastal regions and vice-versa. Results highlight the policy complementarities between reducing the two kinds of frictions and have general implications for countries with different levels of constraints on mobility and housing supply.

JEL-codes: J24 J61 R23 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-cna, nep-lab, nep-mig and nep-ure
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w27643.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:27643

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w27643

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().