alas my home is my castle on the cost of house ownership as a screening device abstract this paper analyzes a model in which housing tenure choice serves as a means of screening households with different utilization rates if the proportion of low utilization types is small there is a separating equilibrium at which tenure choice acts as a screening device consistent with empirical evidence low utilization households buy a house while high utilization types rent otherwise there is a pooling equilibrium the reason why contrary to standard screening models a pooling equilibrium possibly exists is indivisibility of home ownership which makes it a very costly screening device introducing partial ownership restores the standard results non existence of a pooling equilibrium and possible non existence of equilibrium

collateral in credit rationing in markets with imperfect information note in their 1981 article joseph stiglitz and andrew weiss analyze adverse selection and incentive effects in the loan market the models considered are based on two crucial assumptions borrowers are subject to limited liability and lenders cannot distinguish borrowers projects of different risk stiglitz and weiss show that a bank that raises its interest rate may suffer adverse selection because only risky borrowers will be willing to borrow at the higher rate thus lenders may choose not to raise the interest rate to eliminate excess demand resulting in the possibility of a credit rationing equilibrium stiglitz and weiss also consider briefly the role of collateral in such credit rationing models they conclude that lenders may choose not to use collateral requirements as a rationing device an increase in collateral requirements like an increase in the interest rate potentially leads to a decrease in the lender s expected return on loans because of resulting adverse incentive and selection effects the purpose of this note is to further investigate the role of collateral in these models stiglitz and weiss discussion in section iii establishes that adverse selection effects can result from increases in collateral when borrowers are risk averse i will show by returning to a model they discussed earlier in section i that the adverse selection effects can also occur when borrowers are risk neutral stiglitz and weiss outline a model to consider the use of collateral as a rationing device section iii in that model all potential borrowers face the same array of risky projects each potential borrower chooses at most one of those projects to undertake the individuals are by assumption risk averse with decreasing absolute risk aversion and possess different amounts of initial wealth thus choice of project if any to undertake and the method of finance selffinance from initial wealth or loan finance will differ from one individual to the next stiglitz and weiss show that among those who undertake risky projects and who choose borrowing as the method of finance wealthier individuals undertake riskier projects an increase in collateral has two effects on the market for loans those individuals who remain in the market will choose to undertake less risky projects and those individuals who drop out of the market are less wealthy low risk borrowers if the second effect is sufficiently strong then increased collateral requirements will mean decreased expected returns for the lender thus a credit rationing equilibrium may occur since lenders may not choose to use collateral requirements or the interest rate to eliminate excess demand the adverse selection effect just described does not occur in this model if the individuals are risk neutral consequently the potential for a credit rationing equilibrium is limited to cases where borrowers are risk averse to see that increases in collateral requirements can also result in adverse selection if borrowers are risk neutral consider the model stiglitz and weiss used to analyze the adverse selection effects of increases in the interest rate section i pp 395 99 it differs from the section iii model discussed above in three ways first borrowers are risk neutral second all projects ar loan financed the analogy to the section iii model is that no individuals have sufficient wealth to self finance projects third in the section

the impact of usury ceilings on consumer credit usury regulation is a topic with a long history of discussion nevertheless the debate over the merits of usury regulation continues to the present day in the early part of the 1980s the rapid rise in nominal interest rates swung the debate in favor of the opponents of usury ceilings during this period a quarter of the states enacted legislation which largely eliminated their usury ceilings on consumer credit however with the return of lower interest rates in the middle part of the decade the argument for low usury ceilings gained increasing support and as a result several states lowered their usury ceilings on some types of credit the first formal economic model of the impact of usury ceilings was outlined by blitz and long 8 their insightful analysis has led researchers to focus on two hypotheses concerning the impact of usury ceilings on consumer credit hypothesis 1 usury ceilings reduce the quantity of credit obtained by high risk borrowers

credit rationing reply john riley has made a further remark on section iv observationally distinguishable borrowers of our 1981 paper in this review in that paper we defined two types of rationing criterion a rationing occurs when among observationally identical borrowers some get loans and others do not and the rationed borrowers cannot get credit at any interest rate a second type of rationing criterion b rationing occurs when entire types cannot get credit at any interest rate although they would get credit if the supply of funds were sufficiently large this type of rationing is often termed redlining we showed that given the special simplifying assumptions of our model and disregarding the incentive effects of loan contracts if there are many types of observationally distinguishable borrowers only one type is subject to criterion a rationing riley goes on to conclude that rationing becomes of insignificant importance as the number of observationally distinct groups becomes large more specifically the conclusion that one might be tempted to draw from section iv of the 1981 paper is that given the special simplifying assumptions of the paper and ignoring the incentive effects of interest rates delineated in the paper as the number of observationally distinct groups increases the proportion of the population subject to criterion a rationing decreases while the proportion subject to criterion b rationing decreases or increases depending on how the population is partitioned we did not include this conclusion or even a less verbose version in that paper because we feared it might mislead readers in either of two ways first the reader might not have been aware that the conclusion is very sensitive to the special assumptions of the adverse selection sections of our 1981 paper by the time we published our 1981 paper our research extending that model for example to multiperiod settings and to situations where collateral and interest rates were both employed had made it amply clear that the conclusion that type a rationing disappeared in importance as the number of types in the economy increased was not in fact generally valid second even within the special context of those special simplifying assumptions the conclusions would mislead a reader who was not aware that criterion b rationing redlining has consequences for allocative efficiency and macroeconomic policy that are as important as the consequences of criterion a rationing we are not so presumptuous as to believe that the assumptions we made in our 1981 paper should be interpreted as a literal description of the economy those assumptions were made to provide the simplest model in which the market equilibrium would be characterized by credit rationing if one is interested as we are in understanding the importance of rationing in the economy as opposed to its importance within a specific model one should investigate the nature of rationing in more general models that are formulated to more closely resemble the actual economy this we have done in a series of papers which show that with many observationally distinguishable groups there may be rationing of several or even of all groups for

examining crop price effects on production decision and resource allocation an ex ante approach this article examines the output price effects on the us crop production employing an ex ante approach to the differential systems of input demand and output supply the estimation results of the

commercial and industrial demand response under mandatory time of use electricity pricing this paper is the first to evaluate the impact of a large scale field deployment of mandatory time of use tou pricing on the energy use of commercial and industrial firms the regulation imposes higher prices during hours when electricity is generally more expensive to produce we exploit a natural experiment that arises from the rules governing the program to present evidence that tou pricing induced negligible change in overall usage peak usage and peak load as such economic efficiency was not increased bill levels and volatility exhibit minor shifts suggesting that concerns about increased expenditure and customer risk exposure have been overstated

inefficiencies from metropolitan political and fiscal decentralization failures of tiebout competition we examine the welfare effects of provision of local public goods in an empirically relevant setting using a multi community model with mobile and heterogeneous households and with flexible housing supplies we characterize the first best allocation and show efficiency can be implemented with decentralization using head taxes we calibrate the model and compare welfare in property tax equilibria both decentralized and centralized to the efficient allocation inefficiencies with decentralization and property taxation are large dissipating most if not all the potential welfare gains that efficient decentralization could achieve in property tax equilibrium centralization is frequently more efficient an externality in community choice underlies the failure to achieve efficiency with decentralization and property taxes poorer households crowd richer communities and free ride by consuming relatively little housing thereby avoiding taxes copyright oxford university press

determinants of the low sme loan approval rate in croatia the paper proposes a new methodological framework for investigating consistency in loan assessment decisions and determinants of loan approval based on structural equation modelling and covariance structure analysis we focus on a governmental sme loan programme in croatia and investigate possible reasons for low loan approval rate that occurred in spite of interest rates subsidisation and sufficient supply of the loan funds the novelty of the methodological approach taken is that it enables simultaneous investigation of the determinants of the loan approval and testing for consistency in the loan assessment decisions which need not be assumed we test several hypotheses about consistency in the loan approval decisions and lending preferences in croatia the empirical findings reject overall consistency of criteria but indicate a preference toward smaller loans among all sme loan requests banks preferred smaller firms that requested smaller loans the results suggest that individual banks differ in their criteria and in their loan size preferences and that there is no positive correlation between the bank s size and its loan size preference

risk based pricing of interest rates for consumer loans abstract by focusing on observable default risk s role in loan terms and the subsequent consequences for household behavior this paper shows that lenders increasingly used risk based pricing of interest rates in consumer loan markets during the mid 1990s it tests three resulting predictions first the premium paid per unit of risk should have increased over this period second debt levels should have reacted accordingly third fewer high risk households should have been denied credit further contributing to the interest rate spread between the highest and lowest risk borrowers for people obtaining loans the premium paid per unit of risk did indeed become significantly larger after the mid 1990s for example for a 0 01 increase in the probability of bankruptcy the corresponding interest rate increase tripled for first mortgages doubled for automobile loans and rose nearly six fold for second mortgages additionally changes in borrowing levels and debt access reflected these new pricing practices particularly for secured debt borrowing increased most for the low risk households who saw their relative borrowing costs fall furthermore while very high risk households gained expanded access to credit the increases in their risk premiums implied that their borrowing as a whole either rose less or sometimes fell

the bias in price elasticity estimates under homothetic separability implications for analysis of peak load electricity pricing this article demonstrates that the assumption of a homothetically separable utility function places a priori restrictions on the parameters of the demand system if these restrictions are unwarranted an open question if they are not explicitly tested they will lead to biased price elasticity estimates in particular we show that the uncompensated own price elasticities must be smaller than the negative of the expenditure shares that is the price elasticity of peak electricity demand must be less than the negative of the share of expenditure devoted to peak electricity this finding is probably not new to economists familiar with consumer demand analysis nevertheless many recent studies of consumer demand for electricity under time of day rates explicitly impose this restriction the resulting price elasticity estimates are usually quite large in absolute value 5 to 8 but they are the product of restrictive a priori assumptions as well as information embodied in the sample data the results of

an empirical test of credit rationing in the mortgage market abstract recent theoretical models of credit rationing suggest that mortgages are rationed with nonprice terms on the basis of default risk despite the development of secondary mortgage markets and the deregulation of deposit rates we test this hypothesis using aggregate time series data on fha and conventional mortgage originations fha loans are more expensive for borrowers but provide federal guarantees which protect lenders against default losses for this reason fha loans should be subject to easier credit constraints than conventional mortgages and the fha share of mortgage originations should increase with aggregate default risk default risk is proxied by a bond rate quality spread consistent with previous studies our results imply that default risk induced mortgage rationing persists in the post disintermediation era but that fha programs help offset the overall impact of rationing on housing markets

quasi fixity and multiproduct firms abstract a short run model for the supply response and input demand of a multiproduct firm is developed based on the differential production approach a simple parameterization of the model is provided

credit rationing and the demand for owner occupied housing abstract this study applies cross sectional data to test whether default risk induced credit constraints affect the demand for owner occupied housing credit constrained households are argued to exhibit different elasticities of demand for housing than less constrained households housing demand elasticities are then estimated separately for households obtaining va insured and non va loans the government guarantee on va loans insures lenders against default enabling lenders to apply easier nonprice terms of credit results indicate that observed demand elasticities differ significantly across va and conventional mortgage holders that marginal changes in credit constraints affect housing demand and that fha financing mitigates the effect of mortgage constraints

estimation and policy implications of rental housing demand abstract the demand for rental housing using the annual housing survey smsa sample for 1977 is estimated the principal determinants of rental housing demand namely housing price and permanent transitory income are computed through spatially varying hedonic price techniques and instrumental variables methods relating to human and nonhuman capital respectively based on the demand estimation results impacts of hypothetical cash and rent subsidy programs are analyzed in terms of housing and welfare effects it is found that a rent subsidy achieves considerably larger effects than does a cash subsidy

costly monitoring financial intermediation and equilibrium credit rationing abstract this paper establishes a link between equilibrium credit rationing and financial intermediation in a model with asymmetrically informed lenders and borrowers costly monitoring and investment project indivisibilities intermediation is shown to dominate borrowing and lending between individuals and these financial intermediaries exhibit several of the important features of intermediaries as we know them equilibrium interest rates and the aggregate quantity of loans respond quite differently to changes in taste and technology parameters depending on whether or not there is rationing in equilibrium

tenure choice and the demand for housing this paper deals with the estimation by means of nonlinear methods of preference parameters from observation of behaviour in housing markets it differs from previous work on housing market behaviour in several important aspects first it treats the choice of tenure mode that is whether to rent or own and the housing consumption decision as a joint decision second it explicitly uses the same behavioural model in analysing these discrete and continuous elements of housing market behaviour third it allows for an analysis of the role of capital market imperfections and discriminatory practices in constraining housing market decisions

the estimation of product supply and input demand by the differential approach this paper makes use of the differential approach to the theory of the multiproduct firm in order to empirically analyze input demand and product supply in italian agriculture estimation of the parameters of the model with annual 1961 80 data for a sector model of fourteen products and three factors of production suggests possibilities for farmers to change their output mix in response to changes in the expected prices of products on the input demand side the derived demand functions seem to satisfy the integrability conditions but turn out to be quite inelastic

housing choice hindrances and urban spatial structure evidence from matched location and location preference data in chinese cities abstract in a monocentric city with a well functioning residential market pareto efficient spatial equilibrium entails the sorting of residents according to their bid rent gradient in descending order away from city center violation of this sorting condition creates opportunities for pareto improving trading of locations and can be sustained only if the market is hindered we propose a simple ordered location choice model using matched location and location preference data of individual households to examine violations of the pareto efficient spatial sorting condition in so doing we are able to identify population groups facing housing choice hindrances we find in a sample of chinese cities undergoing housing market liberalization that poor marketability of the previously state provided homes inadequate provision of housing finance and spatial mismatch between job market and housing market opportunities contribute to a pareto inefficient spatial structure

are private markets and filtering a viable source of low income housing estimates from a repeat income model while filtering has long been considered the primary mechanism by which markets supply low income housing direct estimates of that process have been absent this has contributed to doubts about the viability of markets and to misplaced policy i fill this gap by estimating a repeat income model using 1985 2011 panel data real annual filtering rates are faster for rental housing 2 5 percent than owner occupied 0 5 percent vary inversely with the income elasticity of demand and house price inflation and are sensitive to tenure transitions as homes age for most locations filtering is robust which lends support for housing voucher programs jel r21 r31 r38

commercial industrial customer response to time of use electricity prices some experimental results this article analyzes a time of use pricing experiment involving over 700 small and medium size commercial industrial firms two basic rate structures were implemented one with time varying demand kw charges and a flat energy kwh charge and the other with time varying energy charges and a flat kw charge a small but statistically significant elasticity of substitution between peak and offpeak kwh consumption is estimated for the summer season in the overall sample for firms facing the time of use demand rate a substantially larger response is estimated in the summer season for the subgroup of large firms in the experiment that faced a time of use demand rate and this response translates into a welfare gain that in just the first year more than offsets the additional metering costs involved under mandatory implementation

setting the standard a framework for evaluating the cost effectiveness of building energy standards abstract the adoption rate and stringency of building energy standards in the u s have been increasing since the mid 1990s as a result of the energy policy act mandate of 1992 epact current evidence on the energy savings that accrue from commercial building energy standards is based on engineering simulations which do not account for realized behaviour once a standard is actually adopted this paper uses quasi experimental variation in commercial building energy standard adoptions to estimate their effect on realized electricity consumption and cost effectiveness in states induced by epact to adopt an energy standard where all new nonresidential construction was erected under a commercial standard electricity consumption per service worker is lower by about 12 and total commercial electricity consumption is lower by 10 including early adopters and never adopters to the analysis leads to a downward bias in the treatment effect the realized electricity savings in the epact states represent three quarters of predicted simulated savings and electricity saved in 2010 came at a cost of approximately 7 7 cents per kwh

income taxes and housing this paper presents new estimates of the distributional impact of special income tax provisions relating to housing it also discusses possible secondary effects of these tax factors resulting from adjustments in the returns to capital shifts in investment and changes in the housing stock the tax benefits to homeowners are shown to be

single name credit risk portfolio risk and credit rationing this paper introduces non diversifiable risk in the stiglitz weiss adverse selection model so that an increase in the average riskiness of the borrower pool causes higher portfolio risk this opens up the possibility of equilibrium credit rationing comparative statics analysis shows that an increase in risk aversion turns a two price equilibrium into a rationing equilibrium a two price equilibrium is more inefficient than a rationing equilibrium and a usury law that rules out the higher of the two interest rates can be welfare improving contrary to the common result the equilibrium may be characterized by over investment

housing demand and community choice an empirical analysis abstract housing demand reflects the household s simultaneous choice of the neighborhood whether to own or rent the dwelling and the quantity of housing services demanded existing literature emphasizes the final two factors but overlooks the choice of community this paper develops an econometric model that incorporates all three components and then estimates this model using a sample of tampa florida households incorporating community choice increases the price elasticity of demand and reduces the differential between white and comparable nonwhite households the results are robust to the inclusion of permanent income and taxes

an empirical input allocation model for the cost minimizing multiproduct firm laitinen and theil 1978 derive a theoretical input allocation model for a multiproduct firm that first minimizes cost and second maximizes profit however its empirical counterpart is not available we linearize the model and derive a general empirically estimable model

credit markets with imperfect information risk aversion versus pessimism abstract stiglitz and weiss 1981 credit rationing is embedded within rank dependent expected utility theory our results show that sufficient pessimism or sufficient risk aversion by borrowers may eliminate adverse selection moreover lender optimism may eliminate credit rationing even when adverse selection exists

credit rationing race and the mortgage market abstract this study applies microdata from the 1983 survey of consumer finances to evaluate the effects of borrower race and default risk in mortgage lending the empirical analysis is based on a probit model of whether borrowers obtain fha or conventional mortgages the former are fully insured and are characterized by easier downpayment constraints but are typically more expensive hence households borrowing through the fha will tend to be credit constrained in the conventional market results of the analysis indicate that variables which proxy lender concerns about default risk and cost have an important effect on the type of loan borrowers obtain empirical estimates also suggest that minority households are significantly less likely to obtain conventional financing than whites even after controlling for various proxies of default risk these results suggest that race effects in mortgage lending may persist for reasons unrelated to borrower default risk

impact of some parameters on investments in oligopolistic electricity markets abstract it is seldom the case that one has the opportunity to compare investments as projected by a long term multi period model to what is eventually realized in practice further although sensitivity analysis is of common use in any optimization setting the impact of some parameters on strategic investments is not yet fully assessed in the context of the deregulated electricity industry starting with a benchmark model of the finnish industry we precisely explore the impact on equilibrium investments of varying such parameters as direct and cross price elasticities length of the planning horizon and the depreciation rate of capacity we run the model with different parameter values and compare the predicted equilibrium with what companies have actually done the model is a stochastic dynamic game involving three players and played over a ten year period our results show the depreciation rate and the planning horizon have a notable effect on investment levels whereas price elasticities seem to play a lesser role although the model s results are rather well aligned to total industry investments it diverges from individual levels this may be due to the cost parameter used and or to the open loop information structure adopted in the computations in any event these results should be of methodological and practical interest to scholars and practitioners involved in strategic investment in the electricity industry

real time pricing of electricity for residential customers econometric analysis of an experiment under real time pricing a network operator sets the price level for a period according to a predefined scheme which depends on the state of demand and costs and announces this price shortly before the period begins the french state owned electric utility experimented with a six rate real time tariff which divides the year into three types of days and each day into two periods the number of days of each type is known in advance to the consumer but the type of any particular day is announced only at the end of the preceding day in order to evaluate the responsiveness of customers to this pricing option we estimate the frisch demand functions for daily electricity consumption derived from a simple dynamic model based on an additively separable intertemporal utility function as the marginal utility of expenditure which enters the frisch demands follows a known stochastic process the econometric model has a state space representation we can then apply the kalman filter to compute the log likelihood function associated with each consumer s time series of electricity consumption the main result of the analysis is that the real time tariff improves the welfare of a majority of consumers participating in the experiment

housing tenure choice evidence from time series abstract a model of tenure choice is specified and estimated a simple expression to represent the expected rate of return on equity for a homeowner is developed also the influence of the federal housing subsidy programs is analyzed both plus permanent income and the implicit rental price of owner occupied housing are important determinants of tenure choice other influences are the financing gap with the standard mortgage instrument in an inflationary environment the number of children less than 18 per family assets and liabilities and mortgage credit terms finally the changes in housing tenure choice over the estimation period are analyzed

loan collateral corporate investment and business cycle abstract collateral and loan rates are observed to be highly cyclical in their use for bank lending the effects of such cyclicality on corporate investment are analyzed in this paper using a dynamic model we find that more collateral causes firms to select riskier safer projects if the loan rate rises above falls below the expected investment return we show that the incentive effect of loan rates becomes stronger with greater collateral with the two credit terms having larger incentive effects on lower quality firms these results offer a new explanation for why lenient collateral policies are associated with rising loan rates in economic upturns but stricter collateral requirements come with falling loan rates during downturns

an econometric model of housing price permanent income tenure choice and housing demand abstract this paper addresses the determination of housing price permanent income tenure choice and housing demand full housing demand elasticities incorporate the interactive effects among the four stages of the model price and income have major effects in the tenure choice equation sociodemographic variables such as age have complex effects that may be lost in simpler forms of estimation

dynamic modeling of housing tenure choice abstract in this study a dynamic random effects simultaneous equation model is developed to model household tenure choice decision the novelty of the study lies in accounting for the dynamic aspects of housing tenure mode namely a move is prerequisite to a change in tenure mode and they are determined jointly expected mobility and tenure choice are interdependent decisions and tenure choice may be state dependent i e taste for ownership acquired or reinforced through the experience of being an owner in addition unobservable household heterogeneity is controlled by imposing a random effects specification the estimation is based on panel data from the psid using the method of maximum simulated likelihood

the estimated effects on industry of time of day demand and energy electricity prices industrial electricity tariffs usually contain two types of consumption related charges the energy charge assessed on total kilowatthours and the demand or capacity charge assessed on maximum kilowatts both charges can be differentiated by time of day applying a premium to kilowatts and kilowatthours consumed during specified peak hours the costs of both these dimensions energy and maximum demand vary by time of day and by season plant capacity must be constructed to meet the maximum or peak demand also capacity is comprised of plants of varying fuel efficiencies 1 figure i depicts a typical firm s pattern of demand or load curve over 24 hours under traditional electricity prices the firm pays usually on a monthly basis an energy price p for total energy f o e dt and demand price p for maximum demand e if these charges are used in a time of day tariff they will be at a higher level during potential utility system peak hours defining the interval to t1 as peak intrapeak maximum demand equals ep and peak energy use equals it e dt if both prices are differentiated by time of day then pp po and pp p where the subscripts denote the peak and off peak periods 2 time of day demand and energy charges can have differing effects the peak energy charge encourages within the peak hours a reduction in the area beneath the load curve that is a reduction in peak energy kilowatthour use it does not explicitly encourage a rearrangement of the load pattern within this interval and so may not reduce the maximum intrapeak demand the peak demand charge encourages a reduction in the maximum demand this can be accomplished directly by flattening peak period use or less directly by reducing use at each instant within the peak hence the peak demand charge has its primary effect on the pattern of use while the energy charge primarily nffprte th 1 p1 nf llq

the real time price elasticity of electricity the real time price elasticity of electricity contains important information on the demand response of consumers to the volatility of peak prices despite the importance empirical estimates of the real time elasticity are hardly available this paper provides a quantification of the real time relationship between total peak demand and spot market prices we find a low value for the real time price elasticity which may partly be explained from the fact that not all users observe the spot market price if we correct for this phenomenon we find the elasticity to be fairly low for consumers currently active in the spot market if this conclusion applies to all users this would imply a limited scope for government intervention in supply security issues

estimating demand for owner occupied housing subject to the income tax the federal income tax code includes several provisions which benefit homeowners first the imputed rent from the ownership of a house is not incorporated into a household s taxable income second mortgage interest and property tax payments are tax deductible finally capital gains go untaxed if they are reinvested these provisions reduce the effective price of housing services by reducing the factor prices for land and structure but they do not reduce the price of operating inputs nor do they necessarily reduce the prices of land and structure proportionately thus they alter the optimum factor input combinations in the production of owner occupant housing services by influencing relative factor prices the homeowner tax provisions also increase effective income if the deductions and exclusions are large enough to shift the households into a lower tax bracket in this case the household receives an effective income transfer in the amount of income saved by not having to pay taxes at a higher rate few attempts at quantifying owner occupant demand behavior have systematically incorporated federal income tax provisions none have considered the effects of these provisions on housing service production behavior maisel et al 121 conducted a study in which income but not price was adjusted for taxes while straszheim 21 using household interview data made an adjustment to the gross price of housing without adjusting income in an analysis of the welfare effects of owner occupant tax benefits laidler l l acknowledges that taxes alter both price and income but uses an estimate of price elasticity which does not incorporate income tax provisions rosen 18 191 however has adjusted both price and income for taxes in a recent estimation of housing demand while rosen s work represents a

the suspension of borrowing an implicit penalty for loan default under imperfect information abstracta credit seeker may be suspended from borrowing for a period of time due to a previous default such suspension is widely used in bank lending through credit check our work analyses the effects of suspension on the investment choice of borrowers under uncertainty and on the lending policy of banks facing asymmetric information we show that suspension should be tightened at low loan rates but loosened otherwise to improve the repayment performance of borrowers we also show that although credit rationing may not be completely removed due to imperfect information the excess demand for credit or transitive waiting in the market can actually be attenuated by such efficient use of suspension our theoretical predictions are consistent with observed cyclical patterns of changes in lendingrates and suspension severity

decompositions of corn price effects implications for feed grain demand and livestock supply this article examines how corn prices affect the demand for feed grains and the supply of livestock outputs the differential approach to the theory of the multiproduct firm is employed to examine ex ante decisions about feed grain demand and livestock supply the estimation results suggest that livestock producers have little flexibility in adjusting the demand for corn in response to an increase in corn prices the substitutable relationship between corn and distillers grains contributes to alleviating pressures on feed costs in response to high corn prices in addition the estimation results highlight that the composition of livestock supply can be altered by changes in livestock prices on the basis of the estimated elasticities the decompositions of profit maximizing input demand are conducted to examine the effects of changes in corn prices on feed grain demand and livestock supply the decomposition results reveal that an increase in corn prices reduces corn demand but raises the demand for distillers grains mainly due to the substitution effects of corn price changes the decomposition results also show that an increase in the price of corn reduces cattle supply but raises the supply of chicken and pork due to the output relationships in supply

too much investment a problem of asymmetric information this paper shows that under plausible assumptions the inability of lenders to discover all of the relevant characteristics of borrowers results in investment in excess of the socially efficient level raising the rate of interest above the free market level will restore optimality this conflicts with generally held views and is contrasted with the stiglitz weiss model it is shown that the assumptions which yield overinvestment support debt as the equilibrium method of finance however under the stiglitz weiss assumptions used to derive an underinvestment result equity is shown to be the equilibrium method of finance

credit rationing something s gotta give equilibrium credit rationing in the sense of stiglitz and weiss is shown to imply that the marginal cost of funds to the borrower is infinite so entrepreneurs have an overwhelming incentive to cut their loans by a dollar and so avoid rationing ways of doing this include scaling down the project decreasing consumption or delaying the project to accumulate more savings credit rationing emerges for indivisible projects only when delay causes sufficient deterioration borrowers then apply for funds at the first opportunity but counterfactually once denied a loan they never reapply conditions for credit rationing are stringent indeed

information and housing search theory and evidence from china market abstractasymmetric market information plays a role in households housing choice to study this role we theoretically and empirically examine the varied behaviours between better informed and less informed households in a housing market the housing search model theoretically predicts that better informed households are more likely to secure a better deal with the data from tianjin in china hedonic models are calibrated to quantify the impacts of asymmetric information on housing search outcomes the results show that the less informed homebuyers need to pay around 1 2 3 more than those better informed homebuyers after controlling the heterogeneity of housing units which are consistent with the theoretical predictions it suggests that policies and institutions to alleviate asymmetric information in housing market could improve the welfare of households

unfair credit allocations this article investigates the impact of credit allocation on heterogeneous wealth entrepreneurs we show that with decreasing risk aversion and unobservable wealth poorer borrowers exert more effort as a consequence of endogenous adverse selection they are either excluded from the market or necessarily subsidize richer borrowers in a pooling equilibrium resulting in a paradoxical and inequitable redistribution alternatively a less likely separating equilibrium may occur in which poor types bear the entire weight of separation in the form of excess risk taking

crowd out effects of place based subsidized rental housing new evidence from the lihtc program abstract since its inception in 1987 the low income housing tax credit lihtc program has ballooned into the largest ever source of subsidized construction of low income housing in the united states accounting for one third of all recent multi family rental construction this paper examines the crowd out effects of this increasingly important source of low moderate income housing to do so we analyze the impact of lihtc construction at three different levels of geography msa county and 10 mile radius circles this allows us to employ increasingly extensive geographic fixed effects that help to difference away unobserved factors political variables are also used as instruments to further facilitate identification in all of our models iv estimates yield substantially greater crowd out than ols confirming the endogenous attraction of lihtc development to areas ripe for new construction our most robust iv estimates indicate that nearly 100 of lihtc development is offset by a reduction in the number of newly built unsubsidized rental units although the confidence band around this point estimate allows for less dramatic assessments additional estimates suggest that lihtc development has a much more moderate impact on construction of owner occupied housing but these estimates are imprecise overall while lihtc development may well affect the location of low moderate income rental housing opportunities our estimates suggest that the impact of the program on the number of newly developed rental housing units appears to be small

adverse selection and moral hazard effects in the mortgage market an empirical analysis with imperfect information prices may have sorting and incentive effects that confound the received theory of market behavior these effects are more likely to be observed in situations where transactions extend over a lengthy period of time as in credit and labor markets hence one may observe equilibrium credit rationing or equilibrium unemployment in labor markets even though these markets are competitive and free of government regulation 7 8 in credit markets higher interest rates may adversely sort good credit risks from bad credit risks similarly higher interest rates may induce borrowers to invest in riskier projects and not to exercise due diligence in the minimization of risks moral hazard either the adverse selection or the moral hazard effects can lead to a reduction in expected profits as the interest rate rises the supply of loanable funds is an increasing function of expected profits if expected profits decline over some interval of rising interest rates then the supply of loanable funds will be concave and backward bending with regard to interest rates over that interval stiglitz and weiss identify the interest rate at which the supply function bends backward as the bank optimal interest rate 8 394 the purpose of this paper is to test the empirical implications drawn from the growing adverse selection and moral hazard literature in the home mortgage market a recent citation search reveals that the stiglitz and weiss 8 paper has been cited over one hundred and fifty times in the last nine years in his survey of the literature stiglitz notes that most of this derivative literature is theoretical and that the models have not been the subject of extensive empirical testing 7 42 the paper is organized as follows in section ii we review the adverse selection and moral hazard literature consider the characteristics peculiar to the mortgage market and identify the empirical implications section iii gives our estimates for the empirical model of the mortgage market among other results we find that mortgage supply is a concave function of the rate of

costly monitoring loan contracts and equilibrium credit rationing this paper develops a model with asymmetrically informed agents and costly monitoring of loan contracts where an equilibrium can exhibit credit rationing borrowers are identical ex ante but some receive loans and others do not in contrast to existing credit rationing theories rationing does not occur here due to inflexible prices adverse selection or moral hazard optimizing behaviour produces a standard debt contract in equilibrium the aggregate quantity of loans and equilibrium interest rates respond differently depending on whether there is rationing in equilibrium

a nonhomothetic generalized leontief cost function based on pooled data factor demand studies of komiya ozaki lau and tamura based upon detailed cross section data on individual production units have found that the nonhomothetic factor limitational nht fl demand system a nonhomothetic version of the leontief fixed coefficient model well explains the data these results however have mostly been ignored in the current literature on flexible functional forms and in fact none of the well known nonhomothetic flexible cost function forms includes the nht fl model i introduce a new nonhomothetic form of the generalized leontief gl cost function which includes the nht fl model as a special case empirical application to a pooled data set of the japanese iron steel industry indicates that his form is superior to the translog diewert wales gl and berndt khaled gl forms copyright 1990 by mit press

a residence time model of housing markets abstract this paper estimates a semi markov model of housing markets in which families move from one home to another spend a random amount of time in each home and choose whether to own or to rent at each move limiting conditions of the semi markov process are used to characterize the steady state frequency of owner occupied housing and to simulate the impact of changes in housing tax policy this approach differs markedly from previous studies of housing tax policy which focus on the entire population as opposed to the movers and ignore the effect of household residence times see king 1980 rosen 1979 white and white 1977 or laidler 1969 residence times further influence the analysis by affecting the relative cost of owning to renting in the tenure choice model homeowners pay legal and realtor fees at the time they move out of their homes which renters do not have to pay the discounted value of these fees declines with length of stay and provides a structural explanation of why families with longer residence times have a greater propensity to own results from the empirical analysis suggest that the semi markov model closely predicts conditions in the united states and provide important insights into the effects of housing tax policy residence times are also found to influence household tenure choice through their impact on the discounted legal and realtor fees paid by homeowners

owner occupied housing capital gains and the tax reform act of 1986 abstract previous homeowners face a nonlinear kinked budget constraint because they can avoid paying tax on the capital gain from the sale of their home if they purchase a more expensive home when they move simulation results suggest that the tax reform act of 1986 tra86 has enhanced the importance of the capital gains kink by raising the after tax cost of housing through lower marginal income tax rates while increasing the tax rate on capital gains as a result a reduction in the capital gains tax rate would reduce housing demand as some families currently at the kink would buy a less expensive home our findings also indicate that the level of excess burden increases with the capital gains tax rate but that tra86 reduced the size of implicit price subsidies received by owner occupiers and related deadweight loss by roughly one half however the distribution of benefits and deadweight loss from the favorable tax treatment of housing remains heavily weighted to higher income families in addition the size of the implicit housing subsidy and related distortion is sensitive to the level of mortgage rates

production economics worthwhile investment abstract agricultural production economics research is examined within a broad framework of scientific development and utilization recent findings in selected areas of the subdiscipline are examined and opportunities for further fruitful inquiry are identified a few stylized facts emerge from recent work and suggest the need for much careful hypothesis testing model exploration and empirical sensitivity analysis in the future

evidence on the demand for mortgage debt by owner occupants abstract this paper explores the relationship between household mortgage debt burdens and housing consumption periodic income nonhousing wealth the income tax position of the household expected mobility and other micro level characteristics that proxy for household risk preferences and life cycle effects we use 1985 and 1989 american housing survey data to estimate mortgage debt level equations simultaneous with house value equations controlling for the contemporaneous nature of these two choices we find that larger debt levels are positively associated with greater value residences and with the level of household income numerous household level demographic characteristics are also systematically related to mortgage demand of particular interest are our findings that the use of mortgage debt is affected significantly by the rate of tax savings on mortgage interest deductions and by the expected mobility of the household

a reexamination of credit rationing in the stiglitz and weiss model we reexamine stiglitz and weiss 1981 credit rationing by simultaneously considering adverse selection and moral hazard if returns of the projects are ranked by first order stochastic dominance neither adverse selection nor moral hazard exists if the projects have equalized expected returns moral hazard does not exist and credit rationing due to adverse selection occurs under extreme conditions if the projects are ranked by second order stochastic dominance ssd adverse selection and moral hazard may coexist logically restoring credit rationing but ssd imposes strict limitations on lenders ability to classify borrowers in general our results do not support significance of credit rationing

on the determinants of credit rationing firm level evidence from transition countries abstract using survey data for firms from eastern european transition economies we investigate the determinants of credit rationing our rationing definition incorporates firms whose loan application was rejected but also discouraged potential borrowers we employ a bivariate probit with censoring approach that accounts for the underlying selectivity since rationed firms are a subset of those without a loan we include firm specific attributes related to the alleviation of informational asymmetries and therefore expected to affect credit rationing we find that credit rationing depends on firm size profitability sales growth ownership type legal status sectoral heterogeneity and the country specific level of domestic credit

asset markets with heterogeneous information this paper studies competitive equilibria of economies where assets are heterogeneous and traders have heterogeneous information about them markets are defined by a price and a procedure for clearing trades and any asset can in principle be traded in any market buyers can use their information to impose acceptance rules which specify which assets they are willing to trade in each market the set of markets where trade takes place is derived endogenously the model can be applied to find conditions under which these economies feature fire sales contagion and flights to quality

cross sectional estimation of a simultaneous model of tenure choice and housing services demand abstract in this paper we analyze the demand for housing services integrating into a single analysis a systematic treatment of several important conceptual and empirical issues our three major objectives are to 1 evaluate the empirical importance of the simultaneity between the tenure choice and consumption level decisions 2 analyze the relationship between household type and housing demand and 3 present new estimates of the parameters of housing demand which are based on detailed microdata in the process we derive and estimate overall income and price demand elasticities which incorporate the impacts of income and price on both the tenure choice and consumption level decisions

an empirical input allocation model for the multiproduct firm laitinen 1980 derives an input allocation model for a multiproduct firm that first maximizes revenue and second maximizes profit while theoretically elegant the model has never been formulated empirically because of the complexity of the model s price deflated terms this paper derives the linear parameterization of the input allocation model that can be used for empirical estimation

on the possibility of credit rationing in the stiglitz weiss model contrary to what is consistently assumed in the literature the return function cannot be hump shaped in the stiglitz weiss 1981 model this has important consequences for the possible occurrence of credit rationing and redlining with a single class of borrowers banks offer credit in two stages demand possibly exceeds supply in stage one but not in stage two with several observationally distinguishable borrower classes the firms in a borrower class are redlined only under circumstances which imply that they would not get credit in a perfect capital market either die rendite funktion kann im stiglitz weiss 1981 modell nicht so wie das in der literatur durchgangig angenommen wird hugelformig sein das hat wichtige implikationen fur die moglichkeit von kreditrationierung einerseits und fur die moglichkeit des ausschlusses ganzer kreditnehmergruppen vom kapitalmarkt andererseits mit nur einer klasse von kreditnehmern erfolgt die kreditvergabe in zwei stufen wahrend auf der ersten stufe eine ubernachfrage vorliegen kann herrscht auf der zweiten stufe marktraumung bei mehreren unterscheidbaren kreditnehmerklassen wird eine klasse nur unter den bedingungen vom kreditmarkt ausgeschlossen bei deren vorliegen sie auch in einem vollkommenen kreditmarkt keinen kredit erhalten wurde

effects of voluntary time of use pricing on summer electricity usage of business customers economic inefficiency can be caused by time invariant retail electricity prices because they do not reflect variations in the cost of providing electricity during the day time of use tou pricing higher electricity prices during peak hours and lower electricity prices during off peak hours is by far the most common way to achieve more efficient levels of electricity consumption through reducing peak demand the empirical evidence of the effectiveness of tou pricing is sparse in the commercial and industrial sectors and there is no consensus in the literature on the statistical significance and magnitude of the effects applying a quasi experimental design this study evaluates an ongoing experiment of voluntary business tou pricing plan by a major utility company in the phoenix metropolitan area using the nearest neighbor matching method we identify control customers for the voluntary participants of the business tou pricing from difference in differences analysis we find a statistically significant reduction in peak hour electricity demand in response to the tou pricing we also find that there is no conservation effect meaning that the total level of electricity consumption does not change under the tou pricing

the response of small and medium size business customers to time of use tou electricity rates in israel this paper reports on the methodology data and results of the israeli time of use tou electricity pricing experiment in the industrial commercial sector we concentrate on the estimation of the demand functions for electricity under tou and the net welfare gains which result from applying tou rates to small and medium size business customers in israel this experiment which was preceded by a 15 month load research study to allow an optimal sample design was concluded in june 1992 the analysis yielded four major conclusions 1 the estimated gains of small and medium size customers in israel from tou rates are sufficient to justify investment in tou metering technology 2 there have been small but noticeable shifts of electricity from the peak to the mid peak if relevant and to the off peak periods during all seasons of the year and particularly during the winter 3 the structure and number of labour shifts during the day and weather are important factors in determining the response of business customers to the tou rates 4 price elasticities vary substantially over the seasons and across sic groups they do not vary with customer size

profit strategy of greek banks cross subsidization and diversification versus complementarity abstractthis study analyses the profit strategy employed by banks in greece using dynamic panel data techniques and a data set which includes proprietary supervisory data covering the whole greek commercial banking system from 2004 to 2011 we provide evidence that banks use interest and non interest income non ii as substitutes rather than complements with non ii representing an indirect competition instrument by the more efficient banks used in place of direct competition with their peers through prices on loans and deposits this behaviour is explained by further decomposing the non ii into the relatively stable fees component and the volatile trading income moreover we provide evidence that the net interest income is primarily affected by the banks market power and their operating costs while more efficient banks exploit their core deposit base to lever their non ii finally macroeconomic developments affect both income components which are found to be procyclical with respect to economic ac

mistake 37 the effect of previously encountered prices on current housing demand based on contrast effects studies from psychology we predicted that movers arriving from more expensive cities would rent pricier apartments than those arriving from cheaper cities we also predicted that as people stayed in their new city they would get used to the new prices and would readjust their housing expenditures countering the initial impact of previous prices we found support for both predictions in a sample of 928 movers from the psid alternative explanations based on unobserved wealth and taste and on imperfect information are ruled out

some evidence on the empirical significance of credit rationing this paper examines the credit rationing debate using detailed contract information on over one million commercial bank loans from 1977 to 1988 while commercial loan rates are sticky consistent with rationing this stickiness varies with loan contract terms in ways that are not predicted by equilibrium credit rationing theory in addition the proportion of new loans issued under commitment does not increase significantly when credit markets are tight despite the fact that borrowers without commitments can be rationed whereas commitment borrowers are contractually insulated from rationing overall the data suggest that equilibrium rationing is not a significant macroeconomic phenomenon

credit and equity rationing in markets with adverse selection previous theories of financial market rationing focussed on a single market either the credit or the equity market an interesting question is whether credit and equity rationing are mutually compatible and how they interact we consider a model with two dimensional asymmetric information where entrepreneurs have private information about both the expected returns and the risk of their projects we show that credit and equity rationing may occur individually or simultaneously moreover competition between the two markets may generate the adverse selection that leads to rationing outcomes

the demand for housing in spain an endogenous switching regression analysis housing demand in spain has been studied by using data disaggregated into primary and secondary housing demands it is found that demand for both types of housing area indeed related and that they are both considered necessities thus suggesting that their consumption ought to be modelled as a joint decision moreover it is found that traditional determinants of housing demand affect primary and secondary home demands differently these differences are attributable to the following economic rationales need for asset holdings diversifications relative high cost of home ownership versus rental in choice locations and differences in land demand intensity across regions in sum the findings suggest that policy makers in spain contrary to popular beliefs must consider secondary homes an integral part of households accommodation need