Faculty & Research

Esteban Rossi-Hansberg

Esteban Rossi-Hansberg

Visiting Professor of Economics

Phone :
1-773-702-3076
Address :
5807 South Woodlawn Avenue
Chicago, IL 60637

Esteban Rossi-Hansberg, the Theodore A. Wells '29 Professor of Economics in the Department of Economics and Woodrow Wilson School at Princeton University, is a Visiting Professor of Economics at Booth teaching Urban Economics in spring 2019.

Rossi-Hansberg’s research studies topics in macroeconomics, international trade, organizational economics, as well as regional and urban economics. His research has proposed theories and uncovered empirical evidence that describes and predicts how economic activity is organized and distributed across space and time, and how firms change their organizational structure depending on their characteristics and the environment they face. Some of his best-known work has studied the effect of offshoring on domestic wages, the internal structure of cities and the policies to improve them, and the role played by migration in the evolution of the world economy. Lately his work has focused on explaining the location decision of agents and its persistence, and well as on understanding the impact of climate change on the distribution of economic activity.

Rossi-Hansberg’s is a fellow of the Econometric Society, a Sloan Fellowship recipient, and was awarded the August Lösch and Geoffrey Hewings Pizes in 2010 for his work on urban economics. His work has been published in all major journals in economics including the American Economic Review, Econometrica, the Quarterly Journal of Economics, the Journal of Political Economy, and the Review of Economic Studies.

In addition to urban economics, Rossi-Hansberg has taught courses in macroeconomics and international trade at both Princeton University and Stanford University. Outside of the university-setting, he serves as a research associate at the National Bureau of Economic Research and as research fellow at the Center for Economic and Policy Research.

Rossi-Hansberg earned a PhD in economics from the University of Chicago. Additionally, he holds both a MA and a BA in economics from ITAM, Mexico.

 

2018 - 2019 Course Schedule

Number Name Quarter
33454 Urban Economics 2019 (Winter)

New: Asia's Geographic Development
Date Posted: Aug  25, 2017
This paper studies the impact of spatial frictions on Asia’s long-term spatial development. Using the framework provided in Desmet, Nagy, and Rossi-Hansberg (2016), we analyze the evolution of Asia’s economy and the relative performance of specific regions and countries. We then perform a number of counterfactual experiments and find that a worldwide drop in transport costs of 40% increases the present discounted value of real income by 70.7% globally and 78% in Asia. These figures are much larger than those found in standard quantitative trade models because they include dynamic effects and take into account intracountry transport costs. We also perform exercises in which we upgrade Asia’s road network or relax migratory restrictions between locations in Asia. These exercises emphasize the important role of spatial frictions in the development of Asia’s economy.

New: Rethinking Detroit
Date Posted: Mar  25, 2017
We study the urban structure of the city of Detroit. Following several decades of decline, the city's current urban structure is clearly not optimal for its size, with a business district immediately surrounded by a ring of largely vacant neighborhoods. We propose a model with residential externalities that features multiple equilibria at the neighborhood level. In particular, developing a residential area requires the coordination of developers and residents, without which it may remain vacant even if its fundamentals are sound. We embed this mechanism in a quantitative spatial economics model and use it to rationalize current city allocations. We then use the model to evaluate existing strategic visions to revitalize Detroit, and to design alternative plans that rely on 'development guarantees' to yield better outcomes. The widespread effects of these policies underscore the importance of using a general equilibrium framework to evaluate policy proposals.

New: Productivity and Organization in Portuguese Firms
Date Posted: Feb  04, 2016
The productivity of firms is, at least partly, determined by a firm's actions and decisions. One of these decisions involves the organization of production in terms of the number of layers of management the firm decides to employ. Using detailed employer-employee matched data and firm production quantity and input data for Portuguese firms, we study the endogenous response of revenue-based and quantity-based productivity to a change in layers: a firm reorganization. We show that as a result of an exogenous demand or productivity shock that makes the firm reorganize and add a management layer, quantity based productivity increases by about 4%, while revenue-based productivity drops by more than 4%. Such a reorganization makes the firm more productive, but also increases the quantity produced to an extent that lowers the price charged by the firm and, as a result, its revenue-based productivity.

New: The Impact of Regional and Sectoral Productivity Changes on the U.S. Economy
Date Posted: Oct  15, 2014
We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to the rest of the economy. The quantitative model we develop features pairwise interregional trade across all 50 U.S. states, 26 traded and non-traded industries, labor as a mobile factor, and structures and land as an immobile factor. We allow for sectoral linkages in the form of an intermediate input structure that matches the U.S. input-output matrix. Using data on trade flows by industry between states, as well as other regional and industry data, we obtain the aggregate, regional and sectoral elasticities of measured TFP, GDP, and employment to regional and sectoral productivity changes. We find that such elasticities can vary significantly depending on the sectors and regions affected and ...

New: The Impact of Regional and Sectoral Productivity Changes on the US Economy
Date Posted: Oct  01, 2013
We study the impact of regional and sectoral productivity changes on the U.S. economy. To that end, we consider an environment that captures the effects of interregional and intersectoral trade in propagating disaggregated productivity changes at the level of a sector in a given U.S. state to the rest of the economy. The quantitative model we develop features pairwise interregional trade across all 50 U.S. states, 26 traded and non-traded industries, labor as a mobile factor, and structures and land as an immobile factor. We allow for sectoral linkages in the form of an intermediate input structure that matches the U.S. input-output matrix. Using data on trade ?flows by industry between states, as well as other regional and industry data, we calibrate the model and carry out a variety of counterfactual experiments that allow us to gauge the impact of regional and sectoral productivity changes. We fi?nd that such changes can have dramatically different effects depending on the sectors ...

New: Housing Externalities: Evidence from Spatially Concentrated Urban Revitalization Programs
Date Posted: Dec  11, 2012
Using data compiled from concentrated residential urban revitalization programs implemented in Richmond, VA, between 1999 and 2004, we study residential externalities. Specifically, we provide evidence that in neighborhoods targeted by the programs, sites that did not directly benefit from capital improvements nevertheless experienced considerable increases in land value relative to similar sites in a control neighborhood. Within the targeted neighborhoods, increases in land value are ...

New: Firm Fragmentation and Urban Patterns
Date Posted: Dec  06, 2012
We document several empirical regularities regarding the evolution of urban structure in the largest U.S. metropolitan areas over the period 1980-1990. These regularities relate to changes in resident population, employment, occupations, as well as the number and size of establishments in different sections of the metropolitan area. We then propose a theory of urban structure that emphasizes the location and integration decisions of firms. In particular, firms can decide to locate their ...

New: The Anatomy of French Production Hierarchies
Date Posted: Jul  26, 2012
We use a comprehensive dataset of French manufacturing firms to study their internal organization. We first divide the employees of each firm into 'layers' using occupational categories. Layers are hierarchical in that the typical worker in a higher layer earns more, and the typical firm occupies less of them. In addition, the probability of adding (dropping) a layer is very positively (negatively) correlated with value added. We then explore the changes in the wages and number of employees ...

New: The Impact of Trade on Organization and Productivity
Date Posted: Aug  24, 2011
A ?firm?'s productivity depends on how production is organized given the level of demand for its product. To capture this mechanism, we develop a theory of an economy where ?firms with heterogeneous demands use labor and knowledge to produce. Entrepreneurs decide the number of layers of management and the knowledge and span of control of each agent. As a result, in the theory, heterogeneity in demand leads to heterogeneity in productivity and other ?firm's? outcomes. We use the theory to ...

New: Urban Accounting and Welfare
Date Posted: Aug  12, 2011
This paper proposes a simple theory of a system of cities that decomposes the determinants of the city size distribution into three main components: efficiency, amenities, and frictions. Higher efficiency and better amenities lead to larger cities, but also to greater frictions through congestion and other negative effects of agglomeration. Using data on MSAs in the United States, we parameterize the model and empirically estimate efficiency, amenities and frictions. Counterfactual exercises ...

New: Spatial Development
Date Posted: Apr  21, 2010
We present a theory of spatial development. A continuum of locations in a geographic area choose each period how much to innovate (if at all) in manufacturing and services. Locations can trade subject to transport costs and technology diffuses spatially across locations. The result is an endogenous growth theory that can shed light on the link between the evolution of economic activity over time and space. We apply the model to study the evolution of the U.S. economy in the last few decades ...

New: Spatial Development
Date Posted: Sep  15, 2009
We present a theory of spatial development. A continuum of locations in a geographic area choose each period how much to innovate (if at all) in manufacturing and services. Locations can trade subject to transport costs and technology diffuses spatially across locations. The result is an endogenous growth theory that can shed light on the link between the evolution of economic activity over time and space. We apply the model to study the evolution of the U.S. economy in the last few decades ...

New: Organizing Offshoring: Middle Managers and Communication Costs
Date Posted: Jul  14, 2009
Why do firms decide to offshore certain parts of their production process? What qualifies certain countries as particularly attractive locations to offshore? In this paper we address these questions with a theory of international production hierarchies in which organizations arise endogenously to make efficient use of agents' knowledge. Our theory highlights the role of host-country management skills (middle management) in bringing about the emergence of international offshoring. By shielding ...

Urban Structure and Growth
Date Posted: Jun  21, 2009
Most economic activity occurs in cities. This creates a tension between local increasing returns, implied by the existence of cities, and aggregate constant returns, implied by balanced growth. To address this tension, we develop a theory of economic growth in an urban environment. We show that the urban structure is the margin that eliminates local increasing returns to yield constant returns to scale in the aggregate, which is sufficient to deliver balanced growth. In a multi-sector economy ...

REVISION: Urban Structure and Growth
Date Posted: Apr  22, 2009
Most economic activity occurs in cities. This creates a tension between local increasing returns, implied by the existence of cities, and aggregate constant returns, implied by balanced growth. To address this tension, we develop a general equilibrium theory of economic growth in an urban environment. In our theory, variation in the urban structure through the growth, birth, and death of cities is the margin that eliminates local increasing returns to yield constant returns to scale in the ...

REVISION: Establishment Size Dynamics in the Aggregate Economy
Date Posted: Apr  22, 2009
Why do growth and net exit rates of establishments decline with size? What determines the size distribution of establishments? This paper presents a theory of establishment dynamics that simultaneously rationalizes the basic facts on economy-wide establishment growth, net exit, and size distributions. The theory emphasizes the accumulation of industry-specific human capital in response to industry-specific productivity shocks. It predicts that establishment growth and net exit rates should ...

New: Firm Fragmentation and Urban Patterns
Date Posted: Mar  23, 2009
We document several empirical regularities regarding the evolution of urban structure in the largest U.S. metropolitan areas over the period 1980-90. These regularities relate to changes in resident population, employment, occupations, as well as the number and size of establishments in different sections of the metropolitan area. We then propose a theory of urban structure that emphasizes the location and internal structure decisions of firms. In particular, firms can decide to locate their ...

New: Task Trade between Similar Countries
Date Posted: Jan  15, 2009
We propose a theory of task trade between countries that have similar relative factor endowments but may differ in size. Firms produce differentiated goods by performing a continuum of tasks, each of which generates local spillovers. Tasks can be performed at home or abroad, but offshoring entails costs that vary by task. In equilibrium, the tasks with the highest offshoring costs may not be traded. Among the remainder, those with the relatively higher offshoring costs are performed in the ...

New: Organizations and Trade
Date Posted: Dec  02, 2008
We survey an emerging literature at the intersection of organizational economics and international trade. We argue that a proper modelling of the organizational aspects of production provides valuable insights on the aggregate workings of the world economy. In reviewing the literature, we describe certain predictions of standard models that are affected or even overturned when organizational decisions are brought into the analysis. We also suggest potentially fruitful areas for future research.

New: Spinoffs and the Market for Ideas
Date Posted: Oct  29, 2008
We present a theory of spinoffs in which the key ingredient is the originator's private information concerning the quality of his new idea. Because quality is privately observed, by the standard adverse-selection logic, the market can at best offer a price that reflects the average quality of ideas sold. This gives the holders of above-average-quality ideas the incentive to spinoff. We show that only workers with very good ideas decide to spin off, while workers with mediocre ideas sell them ...

New: External Economies and International Trade Redux
Date Posted: Oct  24, 2008
We study a world with national external economies of scale at the industry level. In contrast to the standard treatment with perfect competition and two industries, we assume Bertrand competition in a continuum of industries. In this setting, many of the pathologies of the standard treatment disappear. There typically exists a unique equilibrium with trade guided by natural comparative advantage. And, when a country has CES preferences and any finite elasticity of substitution between goods, ...

New: Housing Externalities
Date Posted: Oct  08, 2008
Using data compiled from concentrated residential urban revitalization programs implemented in Richmond, VA, between 1999 and 2004, we study residential externalities. Specifically, we provide evidence that in neighborhoods targeted by the programs, sites that did not directly benefit from capital improvements nevertheless experienced considerable increases in land value relative to similar sites in a control neighborhood. Within the targeted neighborhoods, increases in land value are ...

New: Organizations and Trade
Date Posted: Sep  05, 2008
We survey an emerging literature at the intersection of organizational economics and international trade. We argue that a proper modelling of the organizational aspects of production provides valuable insights on the aggregate workings of the world economy. In reviewing the literature, we describe certain predictions of standard models that are affected or even overturned when organizational decisions are brought into the analysis. We also suggest potentially fruitful areas for future research.

New: The Effect of Information and Communication Technologies on Urban Structure
Date Posted: Jul  23, 2008
This paper examines the effects of information and communication technologies (ICT) on urban structure. Improvements in ICT may lead to changes in urban structure, for example, because they reduce the costs of communicating ideas from a distance. Hence, they may weaken local agglomeration forces and thus provide incentives for economic activity to relocate to smaller urban centres. We use international data on city size distributions in different countries and on country-level characteristics ...

New: Spatial Growth and Industry Age
Date Posted: May  30, 2008
U.S. county data for the last 20 or 30 years show that manufacturing employment has been deconcentrating. In contrast, the service sector exhibits concentration in counties with intermediate levels of employment. This paper presents a theory where local sectoral growth is driven by technological diffusion across space. The age of an industry - measured as the time elapsed since the last major general purpose technology innovation in the sector - determines the pattern of scale dependence in ...

New: Organizing Growth
Date Posted: Feb  15, 2008
We study the impact of information and communication technology on growth through its impact on organization and innovation. Agents accumulate knowledge through two activities: innovation (discovering new technologies) and exploitation (learning how to use the current technology). Exploitation requires the development of organizations to coordinate the work of experts, which takes time. The costs and benefits of such organizations depend on the cost of communicating and acquiring information ...

New: Spatial Growth and Industry Age
Date Posted: Oct  05, 2007
U.S. county data for the last 20 or 30 years show that manufacturing employment has been deconcentrating. In contrast, the service sector exhibits concentration in counties with intermediate levels of employment. This paper presents a theory where local sectoral growth is driven by technological diffusion across space. The age of an industry -- measured as the time elapsed since the last major general purpose technology innovation in the sector -- determines the pattern of scale dependence in ...

New: The Effect of Information and Communication Technologies on Urban Structure
Date Posted: Jul  06, 2007
Two innovations in the last century have changed dramatically the cost of communicating and transmitting information: The first is the widespread adoption of telephony; the second is the internet. We study the implications of these changes in ICT for urban structure. We find robust evidence that increases in the number of telephone lines per capita lead to a more concentrated distribution of city sizes and so correspondingly to more dispersion in the distribution of economic activity in space ...

New: Spin-Offs and the Market for Ideas
Date Posted: Jul  03, 2007
We propose a theory of firm dynamics in which workers have ideas for new projects that can be sold in a market to existing firms or implemented in new firms: spin-offs. Workers have private information about the quality of their ideas. Because of an adverse selection problem, workers can sell their ideas to existing firms only at a price that is not contingent on their information. We show that the option to spin off in the future is valuable so only workers with very good ideas decide to spin ...

New: Spin-Offs and the Market for Ideas
Date Posted: Jun  25, 2007
The authors propose a theory of firm dynamics in which workers have ideas for new projects that can be sold in a market to existing firms or implemented in new firms: spin-offs. Workers have private information about the quality of their ideas. Because of an adverse selection problem, workers can sell their ideas to existing firms only at a price that is not contingent on their information. The authors show that the option to spin off in the future is valuable so only workers with very good ...

New: Trading Tasks: A Simple Theory of Offshoring
Date Posted: Dec  06, 2006
For centuries, most international trade involved an exchange of complete goods. But, with recent improvements in transportation and communications technology, it increasingly entails different countries adding value to global supply chains, or what might be called "trade in tasks." We propose a new conceptualization of the global production process that focuses on tradable tasks and use it to study how falling costs of offshoring affect factor prices in the source country. We identify a ...

New: Firm Fragmentation and Urban Patterns
Date Posted: Mar  28, 2006
We document several empirical regularities regarding the evolution of urban structure in the largest U.S. metropolitan areas over the period 1980-1990. These regularities relate to changes in resident population, employment, occupations, as well as the number and size of establishments in different sections of the metropolitan area. We then propose a theory of urban structure that emphasizes the location and internal structure decisions of firms. In particular, firms can decide to locate their ...

Organization and Inequality in a Knowledge Economy
Date Posted: Aug  02, 2005
We present a theory of the organization of work in an economy where knowledge is an essential input in production: a knowledge economy. In this economy a continuum of agents with heterogeneous skills must choose how much knowledge to acquire and may produce on their own or in organizations. Our theory generates an assignment of workers to positions, a wage structure, and a continuum of knowledge-based hierarchies. Organization allows low skill agents to ask others for directions. Thus, they ...

Firm Size Dynamics in the Aggregate Economy
Date Posted: May  24, 2005
Why do firm growth and exit rates decline with size? What determines the size distribution of firms? This paper presents a theory of firm dynamics that simultaneously rationalizes the basic facts on firm growth, exit, and size distributions. The theory emphasizes the accumulation of industry specific human capital in response to industry specific productivity shocks. The theory implies that firm growth and exit rates should decline faster with size, and the size distribution should have ...

Offshoring in a Knowledge Economy
Date Posted: Mar  29, 2005
How does the formation of cross-country teams affect the organization of work an the structure of wages? To study this question we propose a theory of the assignmenof heterogeneous agents into hierarchical teams, where less skilled agents specialize in production and more skilled agents specialize in problem solving. We first analyze the properties of the competitive equilibrium of the model in a closed economy, and show that the model has a unique and efficient solution. We then study the ...

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Date Posted: Feb  28, 2005