Cyclical and sectoral transitions in the U.S. housing market
Using data from the Panel Study of Income Dynamics, this paper examines the flow of U.S. households within and between two distinct segments of the housing market ? renter-occupied properties and owner-occupied properties. The paper provides relevant empirical moments for microfounded models of the housing sector. In particular, net flows in the housing market are substantially smaller than the gross flows, as is the case in the literature on labor market flows. Housing market turnover also exhibits substantial heterogeneity in household moving rates, the long-run moving trends, and the ...
Quantifying the role of federal and state taxes in mitigating income inequality
Income inequality has risen dramatically in the United States since at least 1980. This paper quantifies the role that the tax policies of the federal and state governments have played in mitigating this income inequality. The analysis, which isolates the contribution of federal taxes and state taxes separately, employs two approaches. First, cross-sectional estimates compare before-tax and after-tax inequality across the 50 states and the District of Columbia. Second, inequality estimates across time are calculated to assess the evolution of the effects of tax policies. The results from the ...
The S&P 500 effect: not such good news in the long run
This paper analyzes the effect on a company's stock price when it is added to the S&P 500 Index. A simple theoretical model is developed to show how trading effects and changes to fundamentals should affect the price of S&P500 additions upon announcement and in the long run. This model predicts that a company added to the S&P500 should experience an initial price increase followed by a reversal of this price increase owing to the predicted increased stock price volatility of companies post-addition. All of these effects should be growing over time because of the increasing importance of ...
Monetary policy and regional house-price appreciation
This paper examines the link between monetary policy and house-price appreciation by exploiting the fact that monetary policy is set at the national level, but has different effects on state-level activity in the United States. This differential impact of monetary policy provides an exogenous source of variation that can be used to assess the effect of monetary policy on state-level housing prices. Policy accommodation equivalent to 100 basis points on an equilibrium real federal funds rate basis raises housing prices by about 2.5 percent over the next two years. However, the estimated effect ...
Impending U.S. spending bust?: the role of housing wealth as borrowing collateral
Using data from the Panel Study of Income Dynamics, this paper considers the mechanism by which changing house values impact U.S. household spending. The results suggest that house values affect consumption by serving as collateral for households to borrow against to smooth their spending. The results show that the consumption of households who need to borrow against their home equity increases by roughly 11 cents per $1.00 increase in their housing wealth. Changing house values, however, have little effect on the expenditures of households who do not need to borrow to finance their ...
Consumption, credit, and the missing young
There are more young adults today with either no credit history or insufficient credit history to be scored by one of the major credit bureaus than there were before the Great Recession ? a reality that is likely an unintended outcome of the CARD Act of 2009. In regressions that include a rich set of controls, this paper shows that measures of young adults missing from credit bureau data act as a drag on state-level consumption growth. This finding seems to be driven by young individuals from more disadvantaged backgrounds having less access to credit since the act went into effect.
The effects of changes in local-bank health on household consumption
This study investigates the relationship between credit availability and household consumption using a novel approach to separate credit demand and supply. We find that a deterioration in local bank health reduces household consumption, with the strongest effects occurring for households that are more likely to need credit—especially those experiencing a negative income shock and having limited liquid assets. The main contributions of the study are the use of an arguably exogenous measure of local bank health and multifaceted indicators of constrained households. Our findings contribute to ...
Household formation over time: evidence from two cohorts of young adults
This paper analyzes household formation in the United States using data from two cohorts of the national Longitudinal Survey of Youth (NLSY)?the 1979 cohort and the 1997 cohort. The analysis focuses on how various demographic and economic factors impact household formation both within cohorts and over time across cohorts. The results show that there are substantial differences over time in the share of young adults living with their parents. Differences in housing costs and business-cycle conditions can explain up to 70 percent of the difference in household-formation rates across cohorts. ...
U.S. household deleveraging: what do the aggregate and household-level data tell us?
Deleveraging is the process by which households decide that their level of debt is inconsistent with their revised economic outlook and adjust their leverage accordingly, primarily by substituting debt repayment for consumption. Household deleveraging is a commonly cited reason for the sluggish consumption growth experienced during the current economic recovery from the Great Recession. This policy brief analyzes the impact of household debt repayment on consumer spending during and after the Great Recession by using aggregate and household-level data. Overall, the data show little evidence ...
Quantifying the role of federal and state taxes in mitigating wage inequality
Wage inequality has risen dramatically in the United States since at least 1980. This paper quantifies the role that the tax policies of the federal and state governments have played in mitigating wage inequality. The analysis, which isolates the contribution of federal taxes and state taxes separately, employs two approaches. First, cross-sectional estimates compare before-tax and after-tax inequality across the 50 states and the District of Columbia. Second, inequality estimates across time are calculated to assess the evolution of the effects of tax policies. The results from the first ...