Essays on regional macroeconomics.

Regions of the U.S. are characterized by considerable economic differences in the magnitude and timing of business cycle fluctuations and the rents and prices of housing. This dissertation seeks to examine such heterogeneity, with the intention of not only understanding the sources of the differences but also providing evidence on general issues in macroeconomics. Chapters II and III quantify the roles of national, industry-specific, and region-specific forces in fluctuations observed in the regions of the U.S. Building on Chapter II's qualitative analysis, Chapter III develops and estimates a detailed statistical model of fluctuations--with the focus on the relative importance of national, region-specific, and industry-specific shocks--in the major regions and industries of the U.S. Specifically, variation among region and industry employment growth rates is decomposed into national, region-, and industry-specific components. Estimates show that, even after controlling for industry mix effects, 40% of the variance of the cyclical innovation to any region's employment growth rate is particular to that region. This measurement indicates that analysis of possible sources of region-specific shocks is an important issue meriting further research. Regional fluctuations provide an as-yet unexplored laboratory for the study of business cycles. Chapter IV examines whether regional variation in housing rents and prices is consistent with the present value model. According to the model, the rent-price ratio will be high in areas in which rent growth is expected to be low in the future. Decennial census data across census tracts permit a simple test of this hypothesis. If investors roughly base valuation on current rent and the expected average rate of rent growth over the next 10 or 20 years, across areas the rent-price ratio in a given census year should be inversely related to actual rent growth over the period between censuses. The estimates yield such an inverse relationship, subject to some limitations. Thus, contrary to previous studies, this chapter's analysis suggests the present value model to be a useful and reasonable formulation of asset pricing.PhDEconomicsUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/103056/1/9303719.pdfDescription of 9303719.pdf : Restricted to UM users only