Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

AI Summary. The authors estimate that geographical differences in cost of living are especially large for low-income US households, and that expensive cities offer college graduates a standard of living similar to affordable cities while offering less-educated households a lower one. A high school dropout household moving from the most affordable to the most expensive commuting zone would see consumption fall 18.5%.

Rebecca Diamond and Enrico Moretti University of California
Date Posted:
Is Database:
Database

For non-college Americans, high local prices mean lower living standards. “A high school drop-out household moving from the least expensive commuting zone to the most expensive would experience an 18.5% decline in market consumption.” @rebeccardiamond

Do expensive cities lower living standards for less-educated workers?

Core argument: The authors estimate that a high school drop-out household moving from the most affordable US commuting zone to the most expensive one would see market consumption fall 18.5%.

We build local consumption price indices that vary by commuting zone (CZ) and income group. We find that geographical differences in cost of living are especially large for low-income households. When we estimate the standard of living that low- and high-skill households can expect in each US commuting zone once we account both for geographical variation in cost of living and also in expected income, we find marked differences between low- and high-skill households. For high-skill households, we find no relationship between expected consumption and cost of living, suggesting that college graduates living in cities with high costs of living enjoy a standard of living generally similar to college graduates living in cities with low cost of living. For high school graduates and high school drop-outs, we find a significant negative relationship between consumption and cost of living, indicating that expensive cities offer lower standard of living than more affordable cities. The differences are quantitatively large. A high school drop-out household moving from the most affordable commuting zone to the most expensive one would experience a 18.5% decline in market consumption.

Takeaways by Macro Roundup® AI

  1. The authors estimate that a high school drop-out household moving from the most affordable US commuting zone to the most expensive one would see market consumption fall 18.5%.
  2. Using local consumption price indices that vary by commuting zone and income group, the authors find geographical differences in cost of living are especially large for low-income households.
  3. The authors find no relationship between expected consumption and cost of living for high-skill households, while for high school graduates and drop-outs the relationship is significantly negative, implying expensive cities offer them a lower standard of living.

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  • The U.S. Low-Wage Structure: A McWage Comparison — Using wage data from most U.S. McDonald's restaurants, the authors find that before the Covid-19 pandemic, differences in entry-level wages across states were strongly related to state minimum wages, with real wages rising only in the roughly half of states raising their minimums. The 2021 wage spike nearly eliminated those geographic differences and left the federal minimum wage near-irrelevant.
  • Trends in U.S. Spatial Inequality: Concentrating Affluence and a Democratization of Poverty — The authors find that rising U.S. geographic inequality is driven mainly by the concentration of affluence, with top income quantiles diverging across states while median household incomes across counties have dispersed more gradually. Poverty rates and bottom income quantiles have converged across areas, alongside equalization of means-tested transfers.
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