Job Market Paper:
Student Debt and High-Skill Worker Location Choice
Abstract: Over the past 40 years, the United States has experienced significant skill-based geographic sorting, with high-skill workers increasingly concentrating in large cities. During the same period, the growth of student debt has far exceeded the rate of inflation, and the average debt load is now roughly $30,000. In this paper, I document a link between these two facts. First, I employ the recently-developed University of California Consumer Credit Panel to estimate the effect of student debt on post-schooling location choices by exploiting an expansion of federal student loan limits in 2008-2009. Using a difference-in-differences framework, I find that an increase of $10,000 in debt makes individuals 6.5 percent more likely to locate in large metropolitan counties. Next, I provide descriptive evidence that student debt makes borrowers more elastic to nominal wages than local prices in migration decisions. Embedding this mechanism in a spatial equilibrium model, I find that the rise in student debt from 1980 to 2019 can account for 5-19 percent of the increase in skill-based sorting over this period. Counterfactual simulation of three policy proposals – debt forgiveness, tuition-free college, and income-driven repayment – show that only income-driven repayment can eliminate distortions to location choices while improving welfare.
Works in Progress:
Does Increased Union Power Cause Pension Under-Funding in the Public Sector? (with Christian Dippel)
Abstract: This paper estimates the effect of variation in public-sector collective bargaining rights on beneﬁts, contributions and funding levels in public-sector pension funds. From 1955 to today, these rights vary across states, over time, and across the ﬁve public-sector employee groups. We exploit changes in bargaining rights driven by either statutory changes or court orders to aid in identification. Using panel analysis and a differences-in-differences framework, we find expanded bargaining rights put employees in a stronger position to push for expanded retirement benefits from local governments during periods of economic booms, particularly in the 1990s. This expansion in benefits had persistent effects on debt as economic growth slowed and governments were no longer able to meet their share of the retirement fund contributions.
Shocking Debt Illusion: Actuarial Pension Plan Adjustments and House Price Capitalization (with Christian Dippel)
Abstract: This paper investigates the extent to which information shocks to a city’s local debt burden are capitalized into house prices. The shocks we focus on are changes to actuarial accounting assumptions in cities’ pension plans. One focus of the paper is on the timing of the transmission of these shocks: we differentiate between when pension boards decide on the changes, when actuarial accountants publish the resulting changes to funding levels, and when city budgets adjust to these changes. A second focus is on which segments of a local housing markets are most affected: we differentiate across homes that price in more the public goods that get cut when city budgets are squeezed, and we differentiate across homes whose owners are better able to substitute those public goods privately.