the structure of unemployment we test for a unit root in postwar unemployment rates for sixteen oecd countries when a one time structural break is incorporated the unit root hypothesis can be rejected for most of the countries and the measured persistence of unemployment falls dramatically we then test for multiple structural changes and find evidence of one or two breaks for those countries for which the unit root hypothesis could be rejected almost all of the breaks are positive reflecting the sustained rise in european unemployment the major exception is the united states where long term unemployment rose in the 1970s and fell in the 1980s

the effect of capital gains taxation on home sales evidence from the taxpayer relief act of 1997 the taxpayer relief act of 1997 tra97 significantly changed the tax treatment of housing capital gains in the united states before 1997 homeowners were subject to capital gains taxation when they sold their houses unless they purchased replacement homes of equal or greater value since 1997 homeowners can exclude capital gains of 500 000 or 250 000 for single filers when they sell their houses such dramatic changes provide a good opportunity to study the lock in effect of capital gains taxation on home sales using 1982 2008 transaction data on single family houses in 16 affluent towns within the boston metropolitan area i find that tra97 reversed the lock in effect of capital gains taxes on houses with low and moderate capital gains specifically the semiannual sales rate of houses with positive gains up to 500 000 increased by 0 40 0 62 percentage points after tra97 representing a 19 24 percent increase from the pre tra97 baseline sales rate in contrast i do not find tra97 to have a significant effect on houses with gains above 500 000 moreover the short term effect of tra97 is much larger than the long term effect suggesting that many previously locked in homeowners took advantage of the exclusions immediately after tra97 in addition i exploit the 2001 and 2003 legislative changes in the capital gains tax rate to estimate the tax elasticity of home sales during the post tra97 period the estimation results suggest that a 10 000 increase in capital gains taxes reduces the semiannual home sales rate by about 0 1 0 2 percentage points or 6 13 percent from the post tra97 average sales rate

the real yield curve and macroeconomic factors in the chilean economy this article estimates a dynamic model for the yield curve incorporating latent and macro factors to represent the term structure of the real interest rates the representation of the yield curve is based on the popular latent factor model of nelson and siegel 1987 but under a dynamic interpretation due to diebold and li 2006 after assuming the data generating process for the latent and macro factors can be represented by a var process the yields macro model can be regarded as a state space representation and estimated by a kalman filter approach or by using a simplified two step procedure proposed by diebold and li 2006 this article follows the simple two step method and makes a comparison check with the kalman filter estimation concluding that the basic intuition of the results is not significantly affected by the use of the simplified approach estimation results give support to the dynamic interaction between yield curve latent factors and macroeconomic variables in particular monetary po

time variation in the persistence of unemployment over the past century abstract this paper investigates the persistence of the unemployment rate for the uk and the us over the past century by modeling the persistence to randomly evolve over time the estimated autoregressive coefficient exhibits significant variation over time indicating the fluctuation between the hysteresis and mean reverting phases we find that the hysteresis phase is to a considerable extent associated with economic downturns caused by macroeconomic shocks with the unemployment rate during this phase showing large deviations from the estimated natural rate of unemployment in contrast for the periods conforming to the natural rate theory the actual unemployment rate fluctuates relatively closely around the estimated natural rate of unemployment

taxation and housing old questions new answers this paper sketches how the tax reforms of the 1980s affected the incentives and distortions associated with tax policy toward housing markets there are three principal conclusions 1 reductions in marginal tax rates particularly for high income households reduced the tax induced distortion in the user cost of owner occupied housing this lowered the deadweight losses associated with the favorable tax treatment of homeownership 2 the increase in the standard deduction in the tax reform act of 1986 tra86 removed several million middle income homeowners who previously itemized from the ranks of itemizers for these households tra86 raised the marginal cost of owner occupied housing these changes also exacerbated the regressive nature of the mortgage interest subsidy in 1988 more than half of the tax losses associated with mortgage interest deductions accrued to the 8 of taxpayers with the highest economic incomes 3 tra86 reduced incentives for rental housing investment contributing to the decline in new multifamily housing starts from 500 000 per year in 1985 to less than 150 000 in 1991 in the long run these policies will lead to higher rents this abstract was borrowed from another version of this item

does public insurance crowd out private insurance the cost of expanding public sector health programs depends critically on the extent to which public eligibility will cover just the uninsured or will crowd out existing private insurance coverage we estimate the extent of crowd out arising from the expansions of medicaid to pregnant women and children over the 1987 1992 period we estimate that approximately 50 percent of the increase in medicaid coverage was associated with a reduction in private insurance coverage this occurred largely because employees took up employer based insurance less frequently there is also some evidence that employers contributed less for insurance and that workers dropped coverage of dependents

neighborhood externality risk and the homeownership status of properties in contrast to corporate and institutional investors single owner occupiers cannot adequately diversify housing investment risk consequently homeownership should be relatively less likely in places with higher housing investment risk using the american housing survey it is documented that neighborhood externality risk a major component of housing investment risk substantially reduces the probability that a housing unit is owner occupied even when controlling for housing type and numerous location and household specific characteristics the effects are quantitatively meaningful and change in change estimates suggest that the effects are causal

the impact of transaction costs and the expected length of stay on homeownership abstract economic theory suggests that an increase in the expected length of stay in a dwelling increases the probability of a household choosing to own a house rather than rent this hypothesis is derived from recognition that there are substantial transaction costs associated with homeownership and increased expected time in the home reduces the annualized transaction cost using a military data set we confirm that expected length of stay in a dwelling and the transaction costs of selling are very important to the ownership decision our best estimate of the transaction costs of selling a home are the sum of 3 of house value and 4 of household earnings

why do households without children support local public schools linking house price capitalization to school spending while residents receive similar benefits from many local government programs only about one third of all households have children in public schools we argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools we identify a proxy for the extent of capitalization the supply of land available for new development and show that towns in massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock towns with little available land also spend more on schools we extend these results using data from school districts in 46 states showing that per pupil spending is positively related to the percentage of developed land this positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending

hysteresis in unemployment after two decades of ratcheting unemployment in europe most economists agree that structural changes associated with higher equilibrium rates of unemployment have occurred but the direction of causality is a matter of controversy have the structural changes caused the long lasting increases in actual unemployment or have the increases in actual unemployment caused the structural changes the latter possibility is often referred to as hysteresis during the past decade a distinct research program has evolved around the idea that equilibrium employment tracks actual unemployment this survey reviews the various hysteretic explanations offered in the literature and evaluates their empirical standing

taxes and borrower behavior evidence from the mortgage interest deductibility limit abstract this paper estimates the behavioral response to mortgage interest tax deductibility by studying the discrete change in the net of tax marginal interest rate that occurs at 1 million in mortgage debt using data on 2004 2016 mortgage originations i estimate excess bunching in the loan distribution based on a counterfactual that accounts for bunching at salient loan amounts findings suggest excess of about 54 000 loans at the deductibility limit or 4 5 of the sample the level of bunching implies an average reduction in borrowing around the 1 million limit of 9 4 percent and mortgage demand elasticities between 0 132 to 0 115 for home purchase loans estimated elasticities imply that from 2004 2016 the mid induced 49 52 billion in deadweight loss in the mortgage market

unit roots and structural breaks in oecd unemployment abstract we apply unit root tests that allow for two endogenous break points in the unemployment rates of 26 oecd countries our results show that unit root tests that do not account for structural breaks are misspecified and suggest excessive persistence

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

tax deductions tax credits and the homeownership rate of young urban adults in the united states the us president s advisory panel on federal tax reform has recommended changes to income tax concessions for homeowners consistent with the opinions of many economists the tax reform panel concl

challenges facing natural rate theory abstract this paper attempts to test the natural rate hypothesis by looking at historical unemployment data for france the uk and the us we find that the unemployment series can be described as stationary around an infrequently changing mean moreover that the speed of convergence towards mean unemployment is slower when unemployment is high and differs across the three countries the two european countries having more persistence we do not find any evidence that the persistence of a change in unemployment is a function of the size of the change we conclude that the data are consistent with multiple equilibria models where large shocks bring the economy from one equilibrium to another and also with models with a moving natural rate

homeownership community interactions and segregation the authors consider a multi community city where community quality is linked to residents civic efforts such as being proactive in preventing crime and ensuring the quality of publicly provided goods homeownership increases incentives for such efforts but credit market imperfections force the poor to rent within community externalities can lead to segregated cities with the rich living with the rich in healthy homeowner communities and the poor living with the poor in dysfunctional renter communities the pattern of tenure segregation across communities in the united states accords well with the study s prediction the authors analyze alternative tax subsidy policies to alleviate inefficiencies in the housing market and identify the winners and losers under such policies

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

forecasting asymmetric unemployment rates asymmetric behavior has been documented in postwar quar terly u s unemployment rates this suggests that improvement over conventional linear forecasts may be possible through the use of nonlinear time series models in this note an out of sample forecasting competition is carried out for a set of leading nonlinear time series models it is shown that several nonlinear forecasts do indeed dominate the linear forecast the results are sensitive however to whether a stationarity inducing transfor mation is applied to the nonstationary unemployment rate series

stationarity of health expenditures and gdp evidence from panel unit root tests with heterogeneous structural breaks this paper re examines the stationarity of national health care expenditures and gdp in a panel setting utilizing data from 20 oecd countries over the period from 1960 to 1997 previous research in this area has recognized the drawback of not allowing for structural breaks in their unit root tests and noted that their empirical results may not be robust we advance the literature by utilizing a recently developed panel lm unit root test that allows for heterogeneous level shifts in contrast to previous analyses that did not consider breaks our results reject the unit root null hypothesis for both series

sectoral shifts and cyclical unemployment reconsidered this paper develops a new measure of reallocation shocks based on the variance of industry stock market excess returns to assess the contribution of sectoral reallocation to unemployment in the postwar u s economy the beveridge curve relationship is used to establish that this series isolates reallocation shocks reallocation shocks are found to explain only a moderate share of the fluctuations in aggregate unemployment on average over the period however reallocation accounted for a substantial share of increases in unemployment in several episodes particularly the mid 1970s reallocation shocks also account for a larger share of fluctuations in unemployment of longer durations than of shorter durations

new housing supply and the dilution of social capital this paper examines the role of local housing supply conditions for social capital investment using an instrumental variables approach and data from the social capital community benchmark survey it is documented that the positive link between homeownership and individual social capital investment is largely confined to more built up neighborhoods with more inelastic supply of new housing the empirical findings provide support for the proposition that in these localities house price capitalization provides additional incentives for homeowners to invest in social capital the findings are also largely consistent with the proposition that built up neighborhoods provide protection from inflows of newcomers that could upset a mutually beneficial equilibrium involving reciprocal cooperation however the results do not appear to be driven by selection based on inherent differences in social aptitudes or by tiebout sorting

valuation of mortgage interest deductibility under uncertainty an option pricing approach abstract we propose a dynamic option pricing model to quantify the tax shield value of us mortgage interest deduction mid under uncertainty we identify non linear forms both convex and concave regions in the pay off of mid and discuss the implications for the valuation of mid the model provides insights regarding the relationship between the effective mid and a set of underlying variables including income level house price mortgage size and state and local tax rates we also show how the tax shield value of mortgage loans changes with the volatility of underlying processes we apply the model to the case of the optimal choice of adjustable versus fixed rate mortgages and prove that under a mean preserving interest rate an adjustable mortgage always offers a bigger tax saving we use the framework to study how the tax reforms of 2017 have affected the mid benefits of different households and find that no household is expected to receive a larger mortgage deduction under the new law finally we find that by putting a cap on deductible state and local taxes the 2017 reform has significantly reduced the quantitative impact of income and house price volatility on the expected mid value

macro factors and the term structure of interest rates this paper presents an essentially affine model of the term structure of interest rates making use of macroeconomic factors and their long run expectations the model extends the approach pioneered by kozicki and tinsley 2001 by modeling consistently long run inflation expectations simultaneously with the term structure application to the u s economy shows the importance of long run inflation expectations in the modeling of long term bond yields the paper also provides a macroeconomic interpretation for the latent factors found in standard finance models of the yield curve the level factor represents the long run inflation expectation of agents the slope factor captures business cycle conditions and the curvature factor expresses a clear independent monetary policy factor

the dispersion of us state unemployment rates the role of market and non market equilibrium factors partridge m d and rickman d s 1997 the dispersion of us state unemployment rates the role of market and nonmarket equilibrium factors reg studies 31 593 607 european nations particularly the uk have been observed to have persistent dispersion in regional unemployment rates the dispersion is often hypothesized to be caused by centralized collective bargaining and government policies that limit regional labour market adjustments although the us labour market is considered more exible possessing higher rates of labour mobility and less government mandates there also is persistent dispersion in us state unemployment rates this paper investigates the factors that underlie the persistent dispersion in us state unemployment rates the factors examined include amenities crime education home ownership and residency patterns industry composition and international migration partridge m d et rickman d s 1997 la dispersion des taux de chomage aux etats unis sur le plan des etats l importa

on the power of dickey fuller tests against fractional alternatives abstract we examine the properties of dickey fuller unit root tests under fractionally integrated alternatives and find that these tests have quite low power

the mortgage interest deduction and its impact on homeownership decisions abstract this paper examines the impact of the combined u s state and federal mortgage interest deduction mid on homeownership attainment using data from 1984 to 2007 and exploiting variation in the subsidy arising from changes in the mid within and across states over time we test whether capitalization of the mid into house prices offsets the positive effect on homeownership we find that the mid boosts homeownership attainment only of higher income households in less tightly regulated housing markets in more restrictive places an adverse effect exists the mid is an ineffective policy to promote homeownership and improve social welfare

unemployment persistence does the size of the shock matter one of the stylized facts of unemployment is that shifts in its mean rate between decades and half decades account for most of its variance in this paper we use a statistical analysis based on markov switching regression models to identify the dates of infrequent changes in the mean of the unemployment rate series of fifteen countries we find that in most countries unemployment persistence is much reduced once the infrequently changing mean rate induced by large shocks to unemployment has been removed we conclude that the observed persistence in unemployment appears to be consistent with multiple equilibria models and models with an endogeneous natural rate 1998 john wiley sons ltd

unit root tests persistence and the unemployment rate of the u s states author affiliation diego romero avila department of economics carretera de utrera km 1 pablo de olavide university 41013 seville spain dromtor upo escarlos usabiaga professor department of economics carretera de utrera km 1 pablo de olavide university 41013 seville spain cusaiba upo es corresponding author acknowledgment the authors would like to thank seminar participants at the pablo de olavide university and dg economics at the european central bank carlos usabiaga acknowledges the financial support from centro de estudios andaluces ecod1 05 033 special thanks go to junsoo lee and nikolay gospodinov for making available to us the codes to implement some of the techniques used in the paper and to two anonymous referees for suggestions that substantially improved the paper the usual disclaimer applies 1 introductionthe high persistence in unemployment rates observed in the developed world since the first oil shock has led to a vivid debate over which paradigm can better explain the behavior of unemployment rates the traditional strand of the literature that forms the basis of the natural rate theory phelps 1967 1968 friedman 1968 assumes that the unemployment rate evolves around an equilibrium level describing stationary fluctuations this equilibrium level or natural rate is set depending on fundamentals of the economy while initially the absence of theories explaining the determination of the natural rate meant that in practice it was taken to be constant and exogenous subsequent developments have attempted to identify the structural factors behind differences across economies and over time including labor productivity technological change real interest rates real exchange rates and energy prices to name a few see phelps 1994 phelps and zoega 1998 according to the structuralist view phelps 1994 most shocks to unemployment are temporary but occasionally the natural rate permanently changes and is affected by variations in the aforementioned structural factors as a consequence the unemployment rate may be characterized as a process that is stationary once a small number of structural breaks are allowed for in contrast to the natural rate and structuralist approaches the hysteresis hypothesis see blanchard and summers 1986 1987 implies that the unemployment rate is path dependent and temporary shocks can affect unemployment permanently 1 while hysteresis is thought to imply that the natural rate is conditioned by the level of unemployment recorded in the past persistence in unemployment which is a special case of the natural rate hypothesis entails a slow adjustment process of reversion toward the mean thus hysteresis implies that unemployment is characterized by a unit root while persistence is characterized by a near unit root in the latter case shocks to unemployment though long lasting would not have a permanent effect to discriminate among theories explaining the behavior of unemployment rates unit root tests have been widely applied the hysteresis hypothesis has been formulated as a unit root process and its rejection lends support to the natural rate hypothesis if no breaks are included in the specification and the structuralist hypothesis if breaks are allowed for the purpose of this article is to investigate which theoretical paradigm most closely represents the behavior of unemployment rates in the states of the united states over the period 1976 2004 we first apply the individual lagrange multiplier lm t statistic proposed by schmidt and phillips 1992 to monthly data and we fail to reject the null hypothesis of a unit root in unemployment for forty states perron 1989 pointed out that the presence of structural changes could favor the nonrejection of the unit root null if they are not properly accounted for therefore we employ the minimum lm t statistic allowing for up to two endogenous changes in level proposed by lee and strazicich 2003

house price responses to a national property tax reform abstract we show that house prices in general did not respond to a substantial cut in the national property tax in sweden the estimates are based on rich register data covering more than 100 000 sales over a time period of two and a half years because the swedish property tax is national and thus unrelated to local public goods our setting is ideal for causal identification of the property tax on house prices we observe price increases only in a small segment of the market containing properties with very high tax values we discuss but can admittedly not empirically discriminate between several potential explanations for why we find no evidence of capitalization except for the top segment of the market

natural rate theory and oecd unemployment our mission is to examine from the perspective of the intertemporal equilibrium models of endogenous natural rate theory the huge swings in unemployment among the oecd countries in recent times we first look at the huge rise in jobless rates between the early 1970s and the early 1990s throughout the oecd in the united states a rise from about 51 per cent to 7 per cent canada from about 6 to 10 japan from 11 to 21 italy from 31 to about 71 the united kingdom from about 33 to about 9 france from about 23 to about 10 and west germany from 4 to 5 1 we then look at the developing recovery of the general unemployment rate most notably in the united kingdom and the united states amid a generally continued elevation of jobless rates among the less educated we see the mid 1990s surge of unemployment in germany france and italy as another story there are other older perspectives of course keynesians interpreted events in the 1970s and in the 1980s as signs of effective demand and effective supply shocks feldstein 1986 fitoussi and phelps 1986 malinvaud 1985 pissarides 1990 but if the natural rate was unchanged they had to explain why the subsequent disinflation was short lived why inflation even turned up in the late 1980s or early 1990s despite high unemployment lacking an endogenous natural rate keynesians could explain the durability of the slump only by positing either a permanent expectational disequilibrium or hysteresis i e non ergodicity as in phelps 1972 or a degree of persistence so great as to be empirically indistinguishable from hysteresis as the slump ran on the expectational possibility wore thin so they were down to hysteresis hicks 1974 launched a break with the keynesian monetarist perspective in the 1980s with his appeal to real frictions or rigidities if wage setting mechanisms make the real wage v sticky in the sense of lerner hence predetermined in the short run the unemployment rate u will rise in the short run in response to a shock contracting the demand wage i e a downward shift of the labour demand schedule in the 1 u v plane bruno and sachs 1985 another landmark was a bargaining model with the property that its natural unemployment rate rose in response to several much discussed shocks such as higher taxes and an energy shock reducing labour productivity layard and

some evidence on hysteresis in unemployment rates abstract we propose an unobserved components model to evaluate unemployment data for evidence on hysteresis effects unemployment is decomposed into a natural rate component assumed to be nonstationary and a cyclical component assumed to be stationary hysteresis effects are modelled by allowing lagged cyclical unemployment to affect the current natural rate the model is estimated using canadian german u k and u s unemployment rate series we find substantive hysteresis effects in the canadian german and u k unemployment series hysteresis effects in the u s unemployment series are negligible

does investment risk affect the housing decisions of families i introduction the purpose of this article is to investigate the effect of heightened price volatility in housing markets on homeownership and housing demand the literature on housing markets has recognized that buying a home involves consumption and investment motives as in ranney 1981 henderson and ioannides 1983 and fu 1995 purchasing a home requires a concentrated investment in housing stock that for most families is not easily diversified caplin et al 1997 indeed in 1995 the typical american household had most of its gross assets in real estate and held no corporate equity and only households in the top 10 of the wealth distribution held portfolios that were diversified tracy et al 1999 in 1998 despite strong stock market gains home equity was a dominant investment for most households although roughly two thirds owned their homes less than half of all households held stock of those households owning both stocks and homes 60 had more wealth in home equity than in stocks di 2001 nominal house prices in u s cities have generally risen over time with some cities experiencing periods of steep house price appreciation however homeowners in many cities have been exposed to considerable downside risk according to repeat sales price indexes published by the federal home loan mortgage corporation freddie mac significant one year declines in home prices are not uncommon for example nominal declines of 15 5 and 9 occurred in san antonio in 1985 denver in 1987 and boston in 1990 respectively sustained house price declines have occurred in texas california and the eastern states for example in the long beach los angeles metropolitan area the nominal price of single family homes declined 22 from 1990 to 1996 1 furthermore there is evidence that losses at the time of sale are surprisingly common 2 what is not clearly understood is the extent to which families are responsive to such house price risk the investment literature has demonstrated that risk averse households prefer to hold less risk at a given expected rate of return when house prices are uncertain homeownership and demand relationships depend on the distribution of the random price variable 3 fu 1991 characterizes the price distribution by its first and second moments and shows that the likelihood of homeownersbip and the demand for owner occupied housing are increasing in the expected rate of house price appreciation and decreasing in house price volatility these results do not hold however for liquidity constrained households when households cannot borrow against the expected future gains of housing investment for current consumption the theoretical effects on housing choices of the expected rate of return and house price uncertainty are ambiguous fu 1995 thus the effect of price volatility on housing choices remains to be determined empirically the empirical research on housing markets includes a number of micro level econometric studies on the determinants of homeownership and housing demand these studies provide a framework for the present study and have shown that a household s after tax relative cost of homeownership permanent and transitory income and family composition are important in explaining housing decisions e g see rosen 1979 dynarski and sheffrin 1985 henderson and ioannides 1987 1989 in addition homeownership is negatively impacted by income uncertainty haurin 1991 and by an inability to generate savings for a down payment as in henderson and ioannides 1987 linneman and wachter 1989 haurin et al 1994 and gyourko et al 1999 nevertheless despite the importance of owner occupied housing in the portfolios of homeowners surprisingly little empirical work exists on the housing choices of families in the presence of house price uncertainty rosen et al 1984 provide some empirical evidence on the question of housing choices and risk

a general equilibrium model of housing taxes and portfolio choice we describe a model in which rental and owner housing are risky assets tenure choice is endogenous and each household is constrained to consume the same amount of owner housing that it has in its investment portfolio at each iteration in the search for an equilibrium we determine the new taxable income for each of 3 578 households from the survey of consumer finances and we use statutory schedules to find the marginal rate and tax paid equilibrium net rates of return are major determinants of the amount of owner housing but a logit model indicates that demographic factors are the main determinants of ownership rates in our simulation taxes on owner housing would raise welfare not only by reallocating capital but also by the government s taking part of the risk from individual properties and diversifying it away measures to disallow property tax or mortgage interest deductions do not help share this risk simulations of the 1986 tax reform indicate a small shift from rental to owner housing and

tax expenditures for owner occupied housing deductions for property taxes and mortgage interest and the exclusion of imputed rental income federal income tax policy affects the cost of homeowner ship for many households popular discussions of the favorable tax treatment of owner occupied housing usually focus on the tax deductibility of mortgage interest and prop erty tax payments as well as the specialized tax rules that affect housing capital gains academic discussions in contrast emphasize the exclusion of the imputed rental income on owner occupied housing as the key tax benefit for homeowners this paper summarizes the current distribution of the tax benefits associated with the mortgage interest and property tax deductions it contrasts this with the distribution of tax benefits asso ciated with the current tax regime for imputed rental income relative to one that taxes home

the persistence of unemployment in the usa and europe in terms of fractionally arima models this article examines the persistence of unemployment in the usa and four european countries by means of fractionally integrated arma arfima models in doing so a type of flexibility in modelling low frequency dynamics not achieved by non fractionally arima models can be provided the results indicate that the unemployment series are much more persistent in some countries such as the uk and france than in others including germany or the usa

hysteresis in unemployment evidence from 48 u s states i introduction one central idea in macroeconomics is the equilibrium unemployment rate hypothesis 1 in many macroeconomic models which allow for some degree of price stickiness fluctuations in demand and supply may lead to deviations of the actual unemployment rate from its equilibrium value these deviations in turn trigger changes in the inflation rate there is nothing in the equilibrium unemployment rate literature which even vaguely suggests such a rate is constant indeed many studies have analyzed the factors which cause the equilibrium unemployment rate to change over time or across areas for example summers 1986 presents evidence of an increased normal u s unemployment rate since the mid 1960s and argues that this increase has in large part resulted from high and growing noncompetitive wage differentials barro 1988 addresses the issue of persistence of unemployment in various countries over a number of time periods and relates measures of persistence to variables that matter theoretically for the economy s speed of adjustment blanchard and summers 1986 1987 propose the so called hysteresis hypothesis of unemployment hysteresis is the term used to describe the long lasting influence of history on the natural rate a recession potentially has permanent effects if it changes attitudes and or characteristics of the unemployed and particularly the long term unemployed furthermore the latter may exert less pressure on the wage setting because they will become outsiders in the labor market the insiders union members or currently employed workers have much incentive to keep wages from falling 2 the hysteresis hypothesis of unemployment has important policy implications it suggests that high unemployment if left by itself may persist and continue to be a serious problem in the economy even in the long run this possibility leaves more room for active government policies to fight recessions and manage the economy the fact that the actual unemployment rate may not fluctuate around some natural rate suggests the possibility of nonstationarity in the unemployment series this relationship can be illustrated with a simple model from wyplosz 1987 or brunello 1990 consider the following phillips curve 1 mathematical expression omitted where p sub t is the current inflation rate e sub t i p sub t is the expected inflation rate of time t given information at time t 1 u sub t is the current unemployment rate mathematical expression omitted is the natural unemployment rate beta is the slope of the phillips curve and xi sub t is an error term the possibility of hysteresis arises when the natural rate is a function of past unemployment rates this can be expressed as follows 2 mathematical expression omitted where c and alpha are constants and zeta sub t is an error term substituting 2 into 1 yields 3 u sub t c alpha u sub t 1 epsilon sub t where epsilon sub t 1 beta e sub t 1 p sub t p sub t xi sub t zeta sub t hysteresis requires the parameter alpha in 3 to be equal to one 3 it implies that once disturbed the unemployment rate tends to wander around without returning to a mean value in this case the unemployment rate and also the natural rate contain a unit root in contrast when alpha is between zero and one the natural rate evolves towards its steady state level c 1 alpha and the weak version of the natural rate hypothesis holds as long as alpha is larger than zero there is persistence in unemployment rate in the sense that past unemployment affects the natural rate we however seek to test for the existence of hysteresis the extreme version of persistence finally when the parameter alpha equals zero the natural rate stays at a constant level c

the social and private micro level consequences of homeownership abstract this paper reviews the literature that describes the micro level economic and social consequences of homeownership we adopt an interdisciplinary approach and include studies from economics sociology geography political science psychology and other disciplines our focus is on the set of consequences of homeownership in developed countries our list of potential outcomes of homeownership includes the impact on household wealth and portfolio choice mobility labor force participation urban structure and segregation home maintenance political and social activities health demographics self esteem and child outcomes there is substantial evidence that homeownership has important effects on some household behaviors and outcomes however we find that much of the past 30 year s literature on consequences of homeowning is deficient from a theoretical or econometric perspective we suggest solutions and identify research gaps present in the literature

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

measuring the natural yield curve we generalize the concept of the natural rate of interest laubach and williams 2003 woodford 2003 by defining and estimating the natural yield curve nyc the term structure of natural interest rates our motivation stems i a from the observation that at times when central banks attempt to directly affect long term interest rates e g via quantitative easing the gap between the short term real and natural rate is no more a good indicator of the monetary policy stance we estimate the nyc on us data document its main properties and show i a that in the period 2008 to 2011 the nyc allows to better capture the us monetary policy stance than the short term natural rate

oecd unemployment structural breaks and stationarity the paper is concerned with testing the unemployment rate of twenty two oecd countries for stationarity a sequential testing procedure was applied where the break data is endogenized three different models were tested for unit roots it was found that the crash model which allows for a shift in the level of the unemployment rate was most relevant furthermore most breaks were associated with the first oil price shock results suggest that in nine countries the unit root can be rejected in ten countries the null hypothesis cannot be rejected and in three cases the results suggest possible trend stationarity

centurial evidence of breaks in the persistence of unemployment a novel procedure is applied to test for switches between hysteresis and the natural rate theory over more than a century of uk and usa unemployment data for both the countries we see a period conforming to hysteresis starting in the early 1920s for the uk and 1930 for usa

housing purchases and transitory income a study with panel data in this paper we explore the role of transitory income in the housing purchase decision because of moral hazard considerations banks typically require downpayments to be financed internally hence transitory income is potentially important in overcoming the downpayment constraint using a novel approach to the measurement of permanent and transitory income we estimate a two stage model in which households decide whether to purchase housing in the first stage and the quantity to be purchased in the second the results indicate a significant role for transitory income in both decision stages

transfer taxes and household mobility distortion on the housing or labor market we estimate the effect of the uk stamp duty land tax sdlt a transfer tax on the purchase price of property or land on different types of household mobility using micro data exploiting a discontinuity in the tax schedule we isolate the impact of the tax from other determinants of mobility we compare homeowners with self assessed house values on either sides of a cut off value where the tax rate jumps from 1 to 3 percent we find that a higher sdlt has a strong negative impact on housing related and short distance moves but does not adversely affect job induced or long distance mobility overall our results suggest that transfer taxes may mainly distort housing rather than labor markets

differences in state unemployment rates the role of labor and product market structural shifts state unemployment rates diverged dramatically in the 1980s differing unemployment rates across states are an important public policy concern because of equity concerns and the pure human consequences of higher unemployment moreover at the national level a greater dispersion in state and regional unemployment rates can increase the natural rate of unemployment and shift the phillips curve out because of an inefficient allocation of the labor force 3 38 one possible cause for the divergence in unemployment rates is national industrial restructuring u s industrial restructuring was suggested by lilien 26 as a cause for the rise in the national unemployment rate moreover national restructuring can have differential impacts across states because states can have dramatically different mixes of industries from each other one of the difficulties of national restructuring from a regional perspective is that it is difficult to avoid on the other hand if regional differences in unemployment are due to state idiosyncratic causes state and local public policy can potentially play a more active role for example the economic problems that plagued the northeast and california during the early 1990s have been typically attributed to national downsizing in the defense industries conversely economic problems in these states may have been driven by factors that are located within the state such as the collapse of their real estate markets

testing okun s law theoretical and empirical considerations using fractional integration abstractfull employment remains at the center of any economic policy following okun s conclusion regarding the trade off relation between unemployment and real gross national product growth new s

nominal term structure and term premia evidence from chile abstractthe downwards trend exhibited in chile s nominal term structure since 2003 has been a common pattern shared by other developed and developing economies to understand the behaviour of the nominal yield curve in chile we rely on an affine dynamic term structure model which allows the term structure to decompose into the expected short term interest rate related to the monetary policy expectation and the term premium we show that most of the fall of long term interest rates as well as its dynamics are related to the term premium rather than the expected short term interest rate moreover we find evidence that term premium is driven primarily by the us term premium and domestic nominal uncertainty derived from expected inflation

the overvaluation of purchasing power parity abstract recent panel studies of purchasing power parity have reported strong evidence of mean reversion in real exchange rates however these studies fail to control for cross sectional dependence in the data this failure has dramatic consequences raising the significance level of tests with a nominal size of 5 percent to as much as 50 percent it is shown in this paper that controlling for cross sectional dependence no evidence against the random walk null can be found in panels of up to 64 real exchange rates this finding cannot be attributed to low power as there is ample power in panels of this size to reject the unit root null