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Working Paper
Growth effects of progressive taxes
The authors study the effects of progressive taxes in conventional endogenous growth models augmented to include heterogeneous households. In contrast to representative agent models with flat-rate taxes, this framework allows us to distinguish between marginal tax rates and the empirical proxies that are typically used for these rates such as the share of tax revenue, or government expenditures, in GDP. The analysis then illustrates how the endogenous nature of these proxy variables causes them to be weakly correlated, or even increase, with economic growth. This study, therefore, helps ...
Working Paper
Consumer Bankruptcy, Mortgage Default and Labor Supply
We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage. Uncertainty in the model is driven by house price shocks, education specific productivity shocks, and catastrophic consumption events, while bankruptcy is governed by the basic institutional framework in the U.S. as implied by Chapter 7 and Chapter 13. The model is estimated using micro data on credit reports and mortgages combined with data from the American Community Survey. We use the model to understand the ...
Working Paper
The anatomy of U.S. personal bankruptcy under Chapter 13
By compiling a novel data set from bankruptcy court dockets recorded in Delaware between 2001 and 2002, the authors build and estimate a structural model of Chapter 13 bankruptcy. This allows them to quantify how key debtor characteristics, including whether they are experiencing bankruptcy for the first time, their past-due secured debt at the time of filing, and income in excess of that required for basic maintenance, affect the distribution of creditor recovery rates. The analysis further reveals that changes in debtors' conditions during bankruptcy play a nontrivial role in governing ...
Report
An anatomy of U.S. personal bankruptcy under Chapter 13
We build a structural model of Chapter 13 bankruptcy that captures salient features of personal bankruptcy under Chapter 13. We estimate our model using a novel data set that we construct from bankruptcy court dockets recorded in Delaware in 2001 and 2002. Our estimation results highlight the importance of debtor?s choice of repayment plan length for Chapter 13 outcomes under the restrictions imposed by the bankruptcy law. We use the estimated model to conduct policy experiments to evaluate the impact of more stringent provisions of Chapter 13 that impose additional restrictions on the length ...
Working Paper
Consumption and time use over the life cycle
The authors incorporate home production in a dynamic general equilibrium model of consumption and saving with illiquid housing and a collateralized borrowing constraint. They show that the model is capable of explaining life-cycle patterns of households' time use and consumption of different categories. Specifically, households' market hours and home hours are fairly stable early in the life cycle. Market hours start to decline sharply at age 50, while home hours begin to increase at age 55. Households' consumption of the market good, home input, and housing services all exhibit hump shapes ...
Working Paper
The dynamics of subprime adjustable-rate mortgage default: a structural estimation
We present a dynamic structural model of subprime adjustable-rate mortgage (ARM) borrowers making payment decisions, taking into account possible consequences of different degrees of delinquency from their lenders. We empirically implement the model using unique data sets that contain information on borrowers' mortgage payment history, their broad balance sheets, and lender responses. Our investigation of the factors that drive borrowers' decisions reveals that subprime ARMs are not all alike. For loans originated in 2004 and 2005, the interest rate resets associated with ARMs as well as the ...
Journal Article
Largest Texas Metros Lure Big-City, Coastal Migrants During Pandemic
Almost two years since the pandemic began, high-frequency data show that migration to Texas has accelerated, as the state’s four biggest metros experience an influx of migrants often from the nation’s largest metropolitan areas. The emergence of working from home has lessened both workers’ and some companies’ reliance on physical offices, clearing the way for the new wave of mobility.
Working Paper
Entrepreneurship and government subsidies under capital constraints: a general equilibrium analysis
This paper studies the interaction of capital constraints with business formation, growth and destruction, and the policy implications of this interaction. A dynamic general equilibrium model is constructed and shown to be consistent with recent empirical finding on this subject. In the model, agents face uninsurable income risk and costly financial intermediation, and they choose to be either a worker or an entrepreneur. A calibrated version of the model is used to examine two government assistance programs: loan guarantees and grants. The main findings are that both programs can improve ...
Journal Article
Moving up: trends in homeownership and mortgage indebtedness.
Since the mid-1980s, important developments have taken place in the housing finance system. In the 1990s, the U.S. economy experienced the longest expansion in its history, marked by substantial growth in household income and wealth. In addition, Congress passed the Tax Reform Act of 1986 and the Taxpayer Relief Act of 1997, two laws favorable to homeowners. Therefore, it's not surprising that homeownership rates and the mortgage indebtedness of American families have also changed significantly. In "Moving Up: Trends in Homeownership and Mortgage Indebtedness," Wenli Li uses the ...
Working Paper
Leaving Households Behind: Institutional Investors and the U.S. Housing Recovery
Ten years after the mortgage crisis, the U.S. housing market has rebounded significantly with house prices now near the peak achieved during the boom. Homeownership rates, on the other hand, have continued to decline. We reconcile the two phenomena by documenting the rising presence of institutional investors in this market. Our analysis makes use of housing transaction data. By exploiting heterogeneity in zip codes' exposure to the First Look program instituted by Fannie Mae and Freddie Mac that affected investors' access to foreclosed properties, we establish the causal relationship between ...