Working papers

Behavioral lock-in: aggregate implications of reference dependence in the housing market (with Cristian Badarinza, Tarun Ramadorai, and Jagdish Tripathy)

We study the aggregate implications of reference dependent and loss averse preferences in the housing market. Motivated by micro evidence, we embed optimizing homeowners with these preferences into a dynamic search and matching equilibrium model with rich heterogeneity and realistic constraints. We assess the model using large and granular administrative data tracking buyers and sellers in the UK housing market; the predictions match regional and time variation in price growth and transaction volumes. The model shows that behavioral frictions in a decentralized market can link nominal quantities with real outcomes; and reveals that the distribution of potential nominal gains in the housing market is a key policy-relevant statistic.

I investigate the effect of credit relaxation on the real estate market and the broader economy. I develop a new mechanism whereby an exogenous collateral credit relaxation propagates through the financial markets and produces a sustained real estate boom. I emphasize the role of credit-constrained entrepreneurs and the impact of credit relaxation on their abilities to create new businesses. The entrepreneurs use the new debt capacity to purchase business capital, increasing output and housing rents during the boom. However, their relatively high consumption propensities create a reversal, where they eventually liquidate their productive assets to finance higher consumption. Output and the interest rate begin to decrease, resembling an endogenous credit crunch without an exogenous credit shock. My analysis also proposes a novel house price decomposition. I characterize the dynamics of the different components affecting house prices in a closed-form phase diagram. Quantitative analysis suggests that the model can explain the house price boom preceding The Great Recession.

Presented at Young Economist Symposium 2021 (Princeton), 16th Annual Economics Graduate Student Conference (WUSTL)

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.

Work in progress

Monetary policy with financial frictions and transactions costs

I consider a heterogeneous agent monetary model with banks, firms, and monetary authority. Firms make portfolio choices between borrowing, capital investments, and holding liquidity while facing a collateral borrowing constraint. Idiosyncratic random shocks and anticipated liquidity needs force occasional portfolio adjustments, which incur fixed transactions costs. Monetary policy affects the real economy through its impact on the credit market, even in the absence of New Keynesian nominal rigidities.

Universities, urbanization, and regional development (with Annika Nivala, Mikko Silliman, and Tuomo Suhonen)

In the 1960s, Finland saw a significant expansion of university education, with several new universities established. We build and estimate a structural gravity model to study the effects of this expansion on the local labor markets, taking into account the reform’s equilibrium effects. We use differences-in-differences to identify the reform’s effect and consider the counterfactual development of the aggregate economy had the expansion never taken place or had the educational expansion been targeted to existing universities.

Policy work

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

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.