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Discussion Paper
Optimists and Pessimists in the Housing Market
Given momentum in house prices over business cycles, research on consumer beliefs since the financial crisis has honed in on the potential importance of extrapolative beliefs?myopically assuming trends in asset prices will continue. Extrapolation is frequently cited as a central reason for excessively optimistic expectations about future asset prices, featuring prominently, for example, in the irrational exuberance narrative of Shiller. Other influential work since the Great Recession has emphasized the outsized role that extrapolative optimists can have in bubble formation. In this post, we ...
Working Paper
The Value of Piped Water and Sewers: Evidence from 19th Century Chicago
We estimate the impact of piped water and sewers on property values in late 19th century Chicago. The cost of sewer construction depends sensitively on imperceptible variation in elevation, and such variation delays water and sewer service to part of the city. This delay provides quasi-random variation for causal estimates. We extrapolate ate estimates from our natural experiment to the area treated with water and sewer service during 1874-1880 using a new estimator. Water and sewer access increases property values by a factor of about 2.8. This suggests that benefits are large relative to ...