Working papers
This paper develops a dynamic general equilibrium housing model to explain how credit supply shocks drive housing boom-bust cycles with excess house price volatility. The model introduces a novel mechanism linking investors’ capital allocation to real estate dynamics, emphasizing credit-constrained firms rather than household borrowing. It embeds an endogenous credit cycle, generating a bust without requiring an explicit shock reversal. The model also captures key housing market dynamics, including house price momentum, large consumption elasticities from housing wealth, and declining interest rates during the boom. Quantitatively, it explains much of the early 2000s U.S. house price surge, attributing it to credit relaxation that increased long-run aggregate productivity by 9–13%. The large productivity effects suggest that the economic costs of macroprudential policies restricting credit access may be significantly higher than previously thought.
Behavioral Lock-In: Housing Market Taxation with Reference Dependent Agents (co-authored with Cristian Badarinza, Tarun Ramadorai, and Jagdish Tripathy)
We embed optimizing agents with reference-dependent and loss-averse preferences into a dynamic equilibrium search and matching model of the housing market with rich heterogeneity and realistic constraints. We estimate and evaluate the model using granular administrative data from the U.K. housing market. Behavioral frictions act as a nominal rigidity, increasing the distortions associated with transaction taxes, and generating a novel source of inefficiency for ongoing property taxes. At the aggregate level, a simple statistic, the prevalence of “paper losses” in the stock of properties, captures variation in prices and volumes across regions, and determines variation of policy impact across locations.
This paper studies the macroeconomic significance of occupational talent allocation. I use Finnish administrative microdata to estimate a Roy model of occupational choice with unobservable skill and preference heterogeneity. I show that workers' sorting behavior changes have not driven aggregate productivity growth in the recent past. Holding skill distribution fixed, potential future gains for aggregate productivity by improving sorting are also limited. However, different time trends on occupational sorting patterns explain up to 40% of relative wage growth in certain occupations during 1995 - 2005. In particular, differential occupational sorting between genders explains 3.5 percentage points, or 16%, of the gender earnings gap. When accompanied by changes in the skill distribution, workers' occupational sorting behavior also matters for aggregate output. Removing gender differences in skills, in particular, would lead to a 28% higher GDP effect than complete gender equalization with identical sorting patterns. I augment this analysis by leveraging the staggered implementation of the Finnish Comprehensive School Reform to discipline another counterfactual exercise. I use the model to decompose the reform effect into its skill and sorting components. I show that the reform's differential impact on women increased aggregate productivity by one percent, half of which was due to the sorting channel.
Policy work (in Finnish)
Onko kestävyysvaje todellinen? The Finnish Economic Journal, 118 (2022), 527-541.
Kestävyysvajeen määritelmä on teoreettinen kysymys: vastaus Lauri Kajanojalle. The Finnish Economic Journal, 119 (2023), 198-202.
Myllärniemi, M. & Eroon koronasta working group (2020). Corona-Free Finland: The rationale and methods for elimination of the coronavirus epidemic in Finland. Working group report. Available at https://www.eroonkoronasta.fi/en/report/.
Publications (mathematics)
10. On the parabolic Harnack inequality for non-local diffusion equations (with D. Dier, J. Kemppainen, and R. Zacher). Math Z. 295 (2020), 1751–1769.
9. Boundary regularity for the porous medium equation (with A. Björn, J. Björn, and U. Gianazza). Arch. Rational Mech. Anal., 230 (2018), no. 2, 493-538.
8. On the interior regularity of weak solutions to the 2-D incompressible Euler equations (with J.M Urbano). Calc. Var. Partial Differential Equations, 56, 126 (2017).
7. Representation of solutions and large-time behavior for fully nonlocal diffusion equations (with J. Kemppainen and R. Zacher). J. Differential Equations, 263 (2017), no. 1, 149-201.
6. Everywhere differentiability of viscosity solutions to a class of Aronsson's equations (with C. Wang and Y. Zhou). Ann. Inst. H. Poincaré Anal. Non Linéaire, 34 (2017), no. 1, 119-138.
5. Decay estimates for time-fractional and other non-local in time subdiffusion equations in R^d (with J. Kemppainen, V. Vergara, and R. Zacher). Math. Ann., 366 (2016), no. 3-4, 941-979.
4. Hölder continuity for parabolic Q-minima in metric measure spaces (with M. Masson). Manuscripta Math.,142 (2013), no. 1-2, 187-214.
3. Local Hölder continuity for doubly nonlinear parabolic equations (with T. Kuusi and J.M. Urbano). Indiana Univ. Math. J., 61 (2012), no. 1, 399-430.
2. Hölder continuity for Trudinger's equation in measure spaces (with T. Kuusi, R. Laleoglu, and J.M. Urbano). Calc. Var. Partial Differential Equations, 45 (2012), no. 1-2, 193-229.
1. Obstacle problem for nonlinear parabolic equations (with R. Korte and T. Kuusi). J. Differential Equations, 246 (2009), no. 9, 3668--3680.