Klump Research

Negative Home Equity and Household Labor Supply

Anonymous — Thu, 21 Jul 2022 17:12:22 +0000

Negative Home Equity and Household Labor Supply Anonymous (not verified) Thu, 07/21/2022 - 11:12

ABSTRACT

Using U.S. household-level data and plausibly exogenous variation in the location-timing of home purchases with a single lender, I find that negative home equity causes a 2% to 6% reduction in household labor supply. Supporting causality, households are observationally equivalent at origination and equally sensitive to local housing shocks that do not cause negative equity. Results also hold comparing purchases within the same year-metropolitan statistical area that differ by only a few months. Though multiple channels are likely at work, evidence of nonlinear effects is broadly consistent with costs associated with housing lock and financial distress.

The Long-Run Effects of School Racial Diversity on Political Identity

Anonymous — Fri, 21 Jan 2022 17:16:02 +0000

The Long-Run Effects of School Racial Diversity on Political Identity Anonymous (not verified) Fri, 01/21/2022 - 10:16

Abstract

How do early-life experiences shape political identity? We examine the end of race-based busing in Charlotte-Mecklenburg Schools, an event that led to large changes in school racial composition. Using administrative data, we compare party affiliation in adulthood for students who had lived on opposite sides of newly drawn school boundaries. Consistent with the contact hypothesis, we find that a 10 percentage point increase in the share of minorities in a White student's assigned school decreased their likelihood of registering as a Republican by 2 percentage points (12 percent). Our results suggest that schools in childhood play an important role in shaping partisanship.

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The Chronic Uncertainty of American Indian Property Rights

Anonymous — Thu, 07 Jan 2021 21:47:52 +0000

The Chronic Uncertainty of American Indian Property Rights Anonymous (not verified) Thu, 01/07/2021 - 14:47

Institutions are the stuff of social and economic life. The importance of understanding the role of institutions in economic growth is now widely appreciated. The Journal of Institutional Economics is devoted to the study of the nature, role and evolution of institutions in the economy, including firms, states, markets, money, households and other vital institutions and organisations. It welcomes contributions by all disciplines and schools of thought that can contribute to our understanding of the features, development and functions of real world economic institutions and organisations.

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Regulating an Experience Good Produced in the Formal Sector of a Developing Country when Consumers Cannot Identify Producers

Anonymous — Mon, 14 Dec 2020 20:57:43 +0000

Regulating an Experience Good Produced in the Formal Sector of a Developing Country when Consumers Cannot Identify Producers Anonymous (not verified) Mon, 12/14/2020 - 13:57

Stephen W. Salant, Timothy James McQuade and Jason Winfree
Review of Development Economics, 16(4): 512-526, 2012.

Tilman Börgers and Timothy James McQuade
The B.E.
Journal of Theoretical Economics, 7(1): 2007.

In developing countries, consumers can buy many goods either in formal markets or in informal markets and decide where to purchase based on the product's price and anticipated quality. We assume consumers cannot assess quality prior to purchase and cannot, at reasonable cost, identify who produced the good they are considering. Many products (meats, fruits, vegetables, fish, grains) sold both in formal groceries and, less formally, on the street fit this description. We assume that producers can adjust quality at a cost and only firms in the formal sector are subject to government regulation. In the long run, producers migrate to the sector that is more pro table. Using this model, we demonstrate how regulations in the formal sector can lead to a quality gap between formal and informal sector goods. We moreover investigate how changes in regulation affect quality, price, aggregate production, and the number of firms in each sector.

https://scholar.harvard.edu/mcquade/publications/regulating-experience-good-produced-formal-sector-developint-country-when-consu
https://ideas.repec.org/p/rff/dpaper/dp-10-52-rev.html

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Markets with Untraceable Goods of Unknown Quality: Beyond the Small-Country Case

Anonymous — Mon, 14 Dec 2020 20:56:42 +0000

Markets with Untraceable Goods of Unknown Quality: Beyond the Small-Country Case Anonymous (not verified) Mon, 12/14/2020 - 13:56

Stephen W. Salant, Timothy James McQuade and Jason Winfree

Journal of International Economics
100: 112-119, 2016.

Abstract
When importing durables and nondurables, consumers often cannot discern quality prior to purchase. If they cannot also identify the individual producer, exporters have diminished incentives to produce high quality goods. To raise the quality of traded experience goods, previous international literature has proposed consolidation of export firms and the imposition of export quotas, policies that may be appropriate for tiny Taiwan but not a colossus like China. We contribute to this literature in three ways. First, we explicitly model the way in which consumers of experience goods rely on the reviews of previous buyers (who in turn rely on the reviews of buyers before them...) when deciding whether to purchase an experience good. Second, we endogenize the price of any given quality. Third, we assume that firms may exercise market power. As we show, once the “small country” assumption is dropped, policies advocated in the literature such as the merger of exporters or the imposition of export quotas can have adverse consequences on the profits of domestic exporters and on the welfare of all consumers. On the other hand, the unilateral imposition of minimum quality standards will increase the profits of domestic exporters while improving the welfare of all consumers.

https://www.sciencedirect.com/science/article/abs/pii/S0022199616300186
https://doi.org/10.1016/j.jinteco.2016.02.004

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Who Pays for Rent Control? Heterogeneous Landlord Response to San Francisco’s Rent Control Expansion

Anonymous — Mon, 14 Dec 2020 20:52:19 +0000

Who Pays for Rent Control? Heterogeneous Landlord Response to San Francisco’s Rent Control Expansion Anonymous (not verified) Mon, 12/14/2020 - 13:52

American Economic Review P&P, 109: 377–380, 2019.
Rebecca Diamond
Tim McQuade
Franklin Qian
AEA PAPERS AND PROCEEDINGS
VOL. 109, MAY 2019 (pp. 377-80)

Using a 1994 law change, we exploit quasi-experimental variation in the assignment of rent control in San Francisco to study which types of landlords bear the burden of decreased rental payments versus substitute away from supplying rent-controlled housing. We find rent control leads to a long-run decrease in the supply of rental housing. This effect is more pronounced among properties managed by corporate landlords versus individual landlords. Raising revenue for rental subsidies through rent control appears to be regressive, since corporations can evade the tax burden of rent control more easily, likely due to their superior access to capital.

Read the research here.

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Idiosyncratic risk of House Prices: Evidence from 26 Million Home Sales

Anonymous — Mon, 14 Dec 2020 20:18:44 +0000

Idiosyncratic risk of House Prices: Evidence from 26 Million Home Sales Anonymous (not verified) Mon, 12/14/2020 - 13:18

Authors: Liang Peng and Thomas G. Thibodeau

This paper uses about 26 million home sales to measure house price idiosyncratic risk for 7,580 U.S. zip codes during three periods: (1) when the U.S. housing market was stable (1996 to 2000), (2) booming (2001 to 2007), and (3) busting (2007 to 2012), and investigates the determinants of house price risk. We find very strong relationships between risk and some basic housing market characteristics. There is a U-shaped relationship between risk and zip-code level median household income; risk is higher in zip codes with more appreciation volatility; and risk is not compensated with higher appreciation.

Read the research here.

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Mortgage Design in an Equilibrium Model of the Housing Market

Anonymous — Mon, 14 Dec 2020 19:05:07 +0000

Mortgage Design in an Equilibrium Model of the Housing Market Anonymous (not verified) Mon, 12/14/2020 - 12:05

“Mortgage Design in an Equilibrium Model of the Housing Market”

By Arvind Krishnamurthy, Timothy James McQuade, Adam Guren

Journal of Finance.

2020, Vol. Forthcoming

Finance

How can mortgages be redesigned to reduce housing market volatility, consumption volatility, and default? How does mortgage design interact with monetary policy? We answer these questions using a quantitative equilibrium life cycle model with aggregate shocks, long-term mortgages, and an equilibrium housing market, focusing on designs that index payments to monetary policy. Designs that raise mortgage payments in booms and lower them in recessions do better than designs with xed mortgage payments. The bene ts are quantitatively substantial: In a simulated crisis under a monetary regime in which the central bank lowers real interest rates in a bust, house prices fall 2.24 percentage points less, 23 percent fewer households default, and consumption falls by 0.79 percentage points less with ARMs relative to FRMs. Among de signs that reduce payments in a bust, we show that those that front-load the payment reductions and concentrate them in recessions outperform designs that spread payment reductions over the life of the mortgage. Front-loading alleviates household liquidity constraints in states where they are most binding, reducing default and stimulating housing demand by new homeowners. To isolate this channel, we compare an FRM with a built-in option to be converted to an ARM with an FRM with an option to be re nanced at the prevailing FRM rate. Under these two contracts, the present value of a lender’s loan falls by roughly an equal amount, but the FRM that can be converted to an ARM, which front loads payment reductions, reduces the declines in prices and consumption six times as much, and reduces default three times as much.

Read the research here.

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Who Wants Affordable Housing in Their Backyard? An Equilibrium Analysis of Low- Income Property Development

Anonymous — Tue, 01 Dec 2020 20:43:08 +0000

Who Wants Affordable Housing in Their Backyard? An Equilibrium Analysis of Low- Income Property Development Anonymous (not verified) Tue, 12/01/2020 - 13:43

Journal of Political Economy, 127:3: 1063-1117, 2019.

Rebecca Diamond & Timothy McQuade
We nonparametrically estimate spillovers of properties financed by the Low Income Housing Tax Credit (LIHTC) onto neighborhood residents by developing a new difference-in-differences style estimator. LIHTC development revitalizes low-income neighborhoods, increasing house prices 6.5%, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher income areas causes house price declines of 2.5% and attracts lower income households. Linking these price effects to a hedonic model of preferences, LIHTC developments in low-income areas cause aggregate welfare benefits of $116 million. Affordable housing development acts like a place-based policy and can revitalize low-income communities.

https://www.nber.org/papers/w22204
https://www.journals.uchicago.edu/doi/abs/10.1086/701354?af=R&mobileUi=0&

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The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco

Anonymous — Sat, 14 Nov 2020 20:40:34 +0000

The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco Anonymous (not verified) Sat, 11/14/2020 - 13:40

American Economic Review, 109:9: 3365-3394, 2019.
By Rebecca Diamond, Tim McQuade, and Franklin Qian*

Using a 1994 law change, we exploit quasi-experimental variation in the assignment of rent control in San Francisco to study its impacts on tenants and landlords. Leveraging new data tracking individuals’ migration, we find rent control limits renters’ mobility by 20 percent and lowers displacement from San Francisco. Landlords treated by rent control reduce rental housing supplies by 15 percent by selling to owner-occupants and redeveloping buildings. Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law. (JEL R23, R31, R38)

https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20181289
https://www.aeaweb.org/articles?id=10.1257/aer.20181289

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