Search Results
Working Paper
The depth of negative equity and mortgage default decisions
A central question in the literature on mortgage default is at what point underwater homeowners walk away from their homes even if they can afford to pay. We study borrowers from Arizona, California, Florida, and Nevada who purchased homes in 2006 using non-prime mortgages with 100 percent financing. Almost 80 percent of these borrowers default by the end of the observation period in September 2009. After distinguishing between defaults induced by job losses and other income shocks from those induced purely by negative equity, we find that the median borrower does not strategically default ...
Working Paper
Affordability, Financial Innovation, and the Start of the Housing Boom
At their peak in 2005, roughly 60 percent of all purchase mortgage loans originated in the United States contained at least one non-traditional feature. These features, which allowed borrowers easier access to credit through teaser interest rates, interest-only or negative amortization periods, and extended payment terms, have been the subject of much regulatory and popular criticism. In this paper, we construct a novel county-level dataset to analyze the relationship between rising house prices and non-traditional features of mortgage contracts. We apply a break-point methodology and find ...
Working Paper
And banking for all?
This paper presents data from a new survey of low- and moderate-income households in Detroit to examine bank account usage and alternative financial service (AFS) products. We find that for the vast majority of households, annual outlays on financial services for transactional and credit products are relatively small, around 1 percent of annual income. This estimate is lower than those extrapolated by previous work using the posted fees of financial services alone, suggesting that LMI households do not always choose the most expensive financial services option. This evidence is also ...
Working Paper
Paying to save: tax withholding and asset allocation among low- and moderate-income taxpayers
We analyze the phenomenon that low- and moderate-income (LMI) tax filers exhibit a "preference for over-withholding" their taxes, a measure we derive from a unique set of questions administered in a dataset of 1,003 households, which we collected through the Survey Research Center at the University of Michigan. We argue that the relationship between their withholding preference and portfolio allocation across liquid and illiquid assets is consistent with models with present-biased preferences, and that individuals exhibit self-control problems when making their consumption and saving ...
Working Paper
The effect of taxation on lifecycle labor supply: results from a quasi-experiment
In predicting the magnitude of the labor supply response to taxation, the standard lifecycle labor supply model distinguishes between unanticipated and anticipated changes in the after-tax return to working. Exploiting age-eligibility rules for claiming a dependent on a tax return facilitates a comparison of the labor supply outcomes of households who are equivalent but for the tax schedule they face. I find that the quasi-random assignment to a tax schedule without an age-eligible dependent corresponds to a decrease in mothers' labor supply by about 40 hours per year and to no discernible ...
Working Paper
Preferences for banking and payment services among low- and moderate-income households
This paper characterizes the features of an account-based payment card--including bank debit cards, prepaid debit cards, and payroll cards--that elicit a high take-rate among low- and moderate-income (LMI) households, particularly those without bank accounts. We apply marketing research techniques, specifically choice modeling, to identify the design of a specific financial services product for LMI households, who often face difficulties maintaining standard bank accounts but need banking services. After monthly cost, we find that, on average, non-monetary features of a payment card, such as ...
Working Paper
Does the NEA crowd out private charitable contributions to the arts?
In this paper, I extend a theoretical model of the crowding out hypothesis, whereby government contributions to a public good displace private giving, in order to illustrate how dollar-for-dollar crowding out is possible even when individuals regard their own contributions and government grants as imperfect substitutes. I estimate that private charitable contributions to arts organizations increased by 60 cents to a dollar due to a major funding cut to the National Endowment for the Arts (NEA) during the mid-1990s. These increases, however, also coincided with, on average, a 25 cent increase ...
Journal Article
Housing affordability: recommendations for new research to guide policy
This article highlights areas where economic research is needed to guide federal policymakers addressing the challenge of improving housing affordability. The author places these research recommendations in the framework of five key issues, reflecting policymakers? need to identify a rationale for government action; to employ a single, clear measure to gauge affordability; to understand the unintended consequences of current housing policies; to ensure that the political environment is considered when developing policy; and to decide whether to use housing finance reform as a means of ...