Location Decisions, Housing Markets and the Macroeconom

This thesis studies the housing markets, spatial sorting and the consumption tax reform using quantitative and computational macroeconomic methods. The thesis consists of two chapters. In particular, the second chapter focuses on the changes in the housing market and spatial housing sorting in the United States, while the third chapter focuses on the evaluation of a reform of the US tax system switching to consumption taxation instead of income taxation.;In the second chapter, I study the changes in housing markets and spatial sorting in the United States from 1981 to 2000: the increased concentration of population in metropolitan areas, and the widening of housing price differences. These changes happened in parallel with the widening of the metropolitan wage premium and the college premium. In order to quantify their impact on spatial sorting and housing prices, I develop a quantitative spatial equilibrium model with heterogeneous agents, endogenous housing prices, and incomplete markets. This model captures well the changes in spatial sorting and house price that has been observed between 1981 and 2000. Through a decomposition exercise, I found that the primary force driving population and price changes is the metropolitan wage premium, which accounts for around 90% of the observed changes. In addition, spatial sorting plays a critical role in determining housing price variations and has exacerbated wealth inequality.;In the third chapter, I evaluate a reform of the US tax system switching to consumption taxation instead of income taxation. We do so in an environment that allows for progressivity of consumption taxes through differential tax rates between basic and non-basic consumption goods. The optimal tax system involves substantial subsidies to the consumption of basic goods. We find large efficiency gains in the long run, with a very small increase in inequality. However, once we consider the transitional dynamics associated to the reform, only very low productivity households and a handful of high productivity low wealth households experience welfare gains.