house price dynamics with dispersed information abstract we use a user cost model to study how dispersed information affects the equilibrium house price in the model agents are disparately informed about local economic conditions consume housing services and speculate on price changes optimists who expect high house price growth buy in anticipation of capital gains pessimists who expect capital losses prefer to rent because of short selling constraints on housing pessimistic expectations are not incorporated in the price of owned houses and the equilibrium price is higher and more volatile relative to the benchmark case of common information we present evidence supporting the model s predictions in a panel of us cities

convergence in adaptation to climate change evidence from high temperatures and mortality 1900 2004 author s barreca a clay k deschenes o greenstone m shapiro js abstract this paper combines panel data on monthly mortality rates of us states and daily temperature variables for over a century 1900 2004 to explore the regional evolution of the temperature mortality relationship and documents two key findings first the impact of extreme heat on mortality is notably smaller in states that more frequently experience extreme heat second the difference in the heat mortality relationship between hot and cold states declined over 1900 2004 though it persisted through 2004 continuing differences in the mortality consequences of hot days suggests that health motivated adaptation to climate change may be slow and costly around the world

the impact of climate on the law of one price a test using north american food prices from the 1920s using grocery price data for over 100 urban locations across the us and canada from the 1920s we show that deviations from the law of one price lop were strongly related to climate differences the effect of climate has a large impact on the elasticity of deviations from lop with respect to distance while having no impact on the border effect we then test a counterfactual to show that the relationship between deviations from lop and temperature does not hold when historical temperature data are replaced with contemporary this is evidence that climate impacts production l impact du climat sur la loi du prix unique un test utilisant les prix de la nourriture en amerique du nord dans les annees 1920 a l aide de donnees sur les prix de la nourriture dans les epiceries dans plus d une centaine de villes aux etats unis et au canada dans les annees 1920 on montre que les deviations par rapport a la loi du prix unique lpu sont fortement reliees aux differences dans le climat l effet du climat a un grand impact sur l elasticite des deviations par rapport a la lpu par rapport a la distance mais aucun impact sur l effet de frontiere on utilise alors un test contrefactuel pour montrer que la relation entre les deviations par rapport a la lpu et la temperature ne tient pas quand on remplace les temperatures historiques par les temperatures contemporaines ceci montre que le climat a un impact sur la production

unanticipated inflation and economic activity abstract this paper presents a new empirical test of the expectations adjusted supply fucntion obtaining the market s inflationary expectations from the market interest rate the results support the existence of a positive relationship between unanticipated inflation and the level of economic activity while anticipated inflation seems to have no effect

the dynamic correlation and volatility of real estate price and rental an application of msv model this article investigates the dynamic conditional correlation between price and rental among four types of real estate markets namely housing retail office and factory in the case of hong kong from january 1993 to december 2008 the dynamic conditional correlation multivariate stochastic volatility dcc msv model and bayesian markov chain monte carlo mcmc are employed to capture the volatility and time varying correlation of property price and rental in each market the empirical results demonstrate that the volatilities of price are significantly larger than those of rental for each type of real estate markets throughout the whole sample period besides the findings indicate that the correlations between price and rental are time varying and the average correlation in the housing market is much larger than those in the other three markets also the conditional correlations in the factory market are the most volatile while those in the office market are relatively stable additionally two pa

adaptation to climate change a review through a development economics lens abstract this paper looks at adaptation to climate change from the point of view of poor households since the development literature has firmly established the role of weather risk as a source of income volatility for the poor and climate change is expected to increase this risk we review the range of risk coping mechanisms available to poorer households with a focus on possible barriers to adaptation we ask both how government interventions affect the set of options available for adaptation and risk coping and also what these adaptive responses imply for the prospects of sustainable development support for adaptation can involve efforts to make existing locations livelihoods and forms of production more resilient to climate risk in situ adaptation or reductions in vulnerability through the geographical and sectoral mobility of the poor transformational adaptation our review shows how successful adaptation will need to strike a balance between the two forms of adaptation avoiding locking in unsustainable practices in locations that are already marginal from an economic perspective and taking account of broader socio economic trends already taking place in many developing countries such as population growth and urbanisation we also highlight important considerations for policy makers which to date have been relatively neglected in the literature in particular related to the dynamic interaction between adaptation and sustainable development

witchcraft weather and economic growth in renaissance europe between the thirteenth and nineteenth centuries as many as one million individuals in europe were executed for the crime of witchcraft the majority of the trials and executions took place during the sixteenth and seventeenth centuries during this period the speed and volume of executions were astonishing in one german town as many as 400 people were killed in a single day midelfort 1972 the trials were ubiquitous conducted by both ecclesiastical and secular courts by both catholics and protestants the victims were primarily women primarily poor and disproportionately widows the persecutions took place throughout europe starting and ending earlier in southwest europe than in the northern and eastern areas and spread even across the atlantic ocean to salem massachusetts although witchcraft trials in europe and america largely ended by the late eighteenth century witchcraft accusations and killings still take place in many countries today particularly in the developing world for example witchcraft is often blamed for aids deaths in sub saharan africa ashforth 2001 and miguel 2003 shows that negative economic shocks are associated with increases in witch killing in modern tanzania belief in the witch and fear of her is enduring while much work has been done on the motivations behind the european trials the large scale causes remain unknown the existing work has primarily been concerned with the factors that played into trials on a small scale why a certain individual was targeted or why a certain type of individual was targeted in a given area this work has indicated that there was a diverse set of issues that played into trials on an individual level more broadly however there are few causal explanations for why witchcraft trials happened at all and on such a large scale in so many

modeling climate feedbacks to electricity demand the case of china this paper is an empirical investigation of the effects of climate on the use of electricity by consumers and producers in urban and rural areas within china it takes advantage of an unusual combination of temporal and regional data sets in order to estimate temperature as well as price and income elasticities of electricity demand the estimated positive temperature electric power feedback implies a continually increasing use of energy to produce electric power which in china is primarily based on coal in the absence of countervailing measures this will contribute to increased emissions increased atmospheric concentrations of greenhouse gases and increases in greenhouse warming

efficient market testing of the expectations adjusted supply function hypothesis for italy 1985 efficient market testing of the expectations adjusted supply function hypothesis for italy applied economics vol 17 no 6 pp 1065 1070

climate change and birth weight there is a growing consensus that emissions of greenhouse gases due to human activity will alter the earth s climate most notably by causing temperatures precipitation levels and weather variability to increase the design of optimal climate change mitigation policies requires estimates of the health and other benefits of reductions in greenhouse gases current evidence on the magnitude of the direct and indirect impacts however is considered insufficient for reliable conclusions a j mcmichael et al 2003 1 in addition to the overall predicted warming trend one important feature of many global climate change forecasts is an increased incidence of very high and low temperatures to provide evidence of the potential benefits of greenhouse gas reductions this paper documents whether the temperature variation predicted to be part of climate change including extreme high and low temperatures historically has had negative health consequences through its effect on babies while in utero using individual level data on more than 37 1 million births we find that exposure to extreme hot temperatures during pregnancy leads to lower birth weight we combine this

economic determinants of land invasions this study estimates the effect of economic conditions on redistributive conflict we examine land invasions in brazil using a panel data set with over 50 000 municipality year observations adverse eco nomic shocks instrumented by rainfall cause the rural poor to invade and occupy large landholdings this effect exhibits substantial heterogeneity by land inequality and land tenure systems but not by other observable variables in highly unequal municipalities negative income shocks cause twice as many land invasions as in municipalities with average land inequality cross sectional estimates using fine within region variation also suggest the importance of land inequality in explaining redistributive conflict i introduction c onflict over land is endemic to many rural econo mies in environments marked by a highly skewed distribution of property incomplete land and credit markets poorly or unevenly enforced property rights and weak political institutions agents often resort to extralegal means to improve their economic positions the poor frequently invade private properties and occupy them until either forcibly expelled or granted official titles land conflict which is prevalent in many countries such as brazil south africa uganda and venezuela may distort the allocation of resources in the agricultural sector away from productive uses and thereby contribute to the persistence of rural poverty how do economic conditions affect this redistrib utive conflict this paper explores this question using a rich municipal level data set of 5 299 land invasions from 1988 to 2004 in brazil we follow miguel satyanath and sergenti 2004 by using rainfall as a source of exogenous variation to study the relationship between income and conflict and we find that adverse economic shocks cause the rural poor to invade large landholdings this effect exhibits considerable het erogeneity by land inequality and land tenure systems in highly unequal municipalities negative income shocks cause twice as many land invasions as in municipalities with average land inequality the effect of income shocks is even stronger in highly polarized municipalities as measured by the degree of bimodality in the land distribution cross sectional estimates using fine within region variation also suggest the importance of land inequality in explaining redistributive conflict we also find that income shocks cause significantly more land invasions in municipalities with a greater proportion of land under fixed rent contracts by contrast we find no evidence of heterogeneity on a range of other political and socioeconomic variables including political competition sharecropping police expenditures and social welfare spending recent microeconometric studies have examined two

geographic reallocation and unemployment during the great recession the role of the housing bust abstract we provide a spatial general equilibrium model of migration and job searching to study the role the housing bust played in mobility rates and labor market outcomes we estimate the parameters governing the migration decisions of households using data on state level migration and labor market patterns from 1991 to 2007 and use the estimated model to characterize the effects of the housing market collapse on labor market outcomes our analysis suggests that the housing bust is responsible for 12 of the increase in unemployment as it reduces workers reallocation and forces more homeowners to look for jobs in areas with lower job finding rates

humanitarian crises and adolescent well being knowledge gaps and prospects adolescence constitutes the second and final window of human growth and a period of specific vulnerabilities such as early pregnancy early marriage hiv infection suicide violence alcohol and drugs only a limited body of research investigates the effects of humanitarian crises on the human capital and well being of adolescents the evidence focuses on the short term effects of conflict and to a lesser extent natural disasters on education physical health and nutrition but not on mental health most analyses examine the situations of individuals exposed in utero and young childhood but rarely during adolescence typically missing are robust empirical identification strategies and estimates on heterogeneous effects across age or gender the lack of quality data and challenges in defining adolescence establishing causality or ensuring ethical research explain the knowledge gaps possible ways to expand the evidence base include mixing georeferenced data on individual location with georeferenced data on crises sharpening quasi experimental analytical techniques and reconsidering the current timing of demographic data collection now spanning 4 or 5 year intervals the failure to make such adjustments will end by ignoring specific vulnerabilities among adolescents and render sustainable progress in well being globally narrowing inequalities and guaranteeing human rights to all more difficult to achieve

the real effects of price variability in the federal republic of germany 1953 1977 abstract using a forty industry data set for the years 1953 1977 for the federal republic of germany evidence is presented on the real effects of price variability measuring price variability as the expenditure share weighted sum of squared deviations about the rate of inflation it is found that increased variability reduces real gdp hours of work and production employment while increasing the unemployment rate further it is found that unanticipated inflation has a positive influence on real variables for six different measures of unanticipated inflation the six inflation series do not support the natural rate hypothesis in that the effect of the expected inflation rate is not always insignificant

clearing the air the effects of gasoline content regulation on air quality this paper examines the effects of u s gasoline content regulations on groundlevel ozone pollution these regulations are costly and have been shown to fragment gasoline markets and raise prices paid by consumers we provide the first comprehensive empirical estimates of the regulations air quality benefits we exploit the fact that gasoline regulations vary by time and place of introduction using both difference in difference and regression discontinuity designs we show that federal regulations targeting the emissions of volatile organic compounds vocs one of the two main precursors to ozone do not substantially improve air quality this outcome is driven by the response of refiners to the regulation minimizing the cost of abatement involves removing a type of voc from gasoline that is not an important determinant of ozone pollution in california however we show that precisely targeted regulations requiring the removal of vocs particularly prone to forming ozone caused a significant improvement in air quality

policy analysis of the greenhouse effect an application of the page model abstract in this paper we introduce a comprehensive model for policy analysis of the greenhouse effect page we apply the page model to assess the merits of policies to prevent global warming by controlling the emissions of greenhouse gases and policies to adapt to any global warming that occurs the results confirm that it is difficult to overcome the problem of global warming by taking preventive action alone the argument for introducing an aggressive adaptive policy is very strong we calculate the valuation that would have to be placed upon non economic environmental and social impacts for a combined strategy of preventive and adaptive policies to be considered a worthwhile option both for individual regions and for the world as a whole we also show that uncertainties in all four groups of inputs to the model scientific costs of control costs of adaptation and valuation of impacts have a great influence on the costs and impacts of the combined strategy

environment health and human capital in this review we discuss three major contributions economists have made to our understanding of the relationship between the environment and individual well being first in explicitly recognizing how optimizing behavior particularly in the form of residential sorting can lead to nonrandom assignment of pollution economists have employed a wide range of quasi experimental techniques to develop causal estimates of the effect of pollution second economic research has placed a considerable focus on the role of avoidance behavior which is an important component for understanding the difference between biological and behavioral effects of pollution and for proper welfare calculations lastly economic research has expanded the focus of analysis beyond traditional health outcomes to include measures of human capital including labor supply productivity and cognition our review of the quasi experimental evidence on this topic suggests that pollution does indeed have a wide range of effects on individual well being even at levels well below current regulatory standards given the importance of health and human capital as an engine for economic growth these findings underscore the role of environmental conditions as an important factor of production jel i12 i31 j24 q51 q53

climate shocks and exports this paper uses international trade data to examine the effects of climate shocks on economic activity we examine panel models relating the annual growth rate of a country s exports in a particular product category to the country s weather in that year we find that a poor country being 1 degree celsius warmer in a given year reduces the growth rate of that country s exports by between 2 0 and 5 7 percentage points with no detectable effects in rich countries we find negative effects of temperature on exports of both agricultural products and light manufacturing products with little apparent effects on heavy industry or raw materials the results confirm large negative effects of temperature on poor countries economies and suggest that temperature affects a much wider range of economic activity than conventionally thought this abstract was borrowed from another version of this item

house prices and marital stability we investigate the effect of house price changes on divorce using data for 1991 2010 from the current population survey and the federal housing finance agency our findings suggest that changing house prices significantly affect the share of a cohort that is divorced and that these effects are asymmetric with respect to housing gains versus losses in addition we find differential effects for groups that are more likely to be homeowners versus renters some of this evidence is consistent with homeowners being locked into their homes and hence marriages by increased transactions costs in down markets

equity and time to sale in the real estate market evidence from the boston condominium market of the early 1990s reveals that an owner s equity position determines his experience as a seller an owner of a property with a high loan to value ratio sets a higher asking price has a higher expected time on the market and if he sells receives a higher price than an owner with proportionately less debt the down payment requirement for purchasers but not incumbent owners provides a simple explanation for this phenomenon among owner occupants the results provide supporting evidence for equity based aggregate theories of price volume movements in the housing market copyright 1997 by american economic association

tail hedge discounting and the social cost of carbon the choice of an overall discount rate for climate change investments depends critically on how different components of investment payoffs are discounted at differing rates reflecting their underlying risk characteristics such underlying rates can vary enormously from 1 percent for idiosyncratic diversifiable risk to 7 percent for systematic nondiversifiable risk which risk adjusted rate is chosen can have a huge impact on cost benefit analysis in this expository paper i attempt to set forth in accessible language with a simple linear model what i think are some of the basic issues involved in discounting climate risks the paper introduces a new concept that may be relevant for climate change discounting the degree to which an investment hedges against the bad tail of catastrophic damages by insuring positive expected payoffs even under the worst circumstances the prototype application is calculating the social cost of carbon jel c51 q54 q58

ask prices offers and time to sale in an online exchange i introduction in this article we consider the role served by the ask price posted by sellers in an online exchange for used computers the functional role served by the ask price in this exchange is similar to that in other bilateral exchange settings the ask price is not binding and essentially serves as a starting point for negotiations furthermore every offer that we observe by buyers lies well below the ask price this type of bargaining institution is common in online marketplaces and also in markets for used cars housing and goods sold through want ads placed in newspapers the general finding of empirical literature examining these other markets is that ask prices convey information a high ask price may indicate a desire by the seller to hold out for a higher offer in such a setting ask price dispersion may arise if sellers trade off higher prices against the likelihood of making a sale high ask prices will then lead to higher sale prices on average but longer time on the market the standard justification for the inverse relationship between ask prices and time on the market is that a seller asking a high price will receive fewer offers if search by buyers is costly most of the existing findings in support of this view have focused on real estate markets as an empirical matter it is not clear that ask prices should play a similar role in the online setting that we examine although the notion that sellers have differing reservation prices seems plausible if the market is characterized by perfect information and costless search then ask prices will serve no functional role this is important because there is a general anecdotal view that online markets serve as sufficiently effective mechanisms for information transmission that search is costless in such a setting an initial ask price posted by the seller would be irrelevant one caveat to this view is that although information is readily available online it may be costly to process the used computers sold on this exchange are complex products that differ on a number of dimensions viewing the large amount of information available and forming an estimate of willingness to pay in such a situation is a nontrivial task though the cost in terms of time and effort required to process this information does not fall as neatly within the imperfect information paradigm as does the housing market it is clearly analogous the search costs involved in visiting and walking through a house for sale are substantial but relative to the value of the house they may be no larger than the costs of viewing and assessing the characteristics of a used computer it is possible then that the immediate access to information online may not eliminate search costs one contribution of our research therefore is an assessment of the extent to which online markets can be thought of as search markets our approach is to see whether the relationship between ask prices offers and time to sale on the exchange is similar to that in other markets characterized by costly search our data differ in some key ways from that available in more traditional settings for example data regarding the number of offers a given property receives are rarely available in housing markets nor in many cases is the sequence of offers for a given property observable in our case we observe the number of offers made and the level of each offer a disadvantage of our data is that we do not observe final transaction prices because once computers are sold they are removed from the publicly available listings on the exchange thus we cannot directly estimate the relationship between ask prices and sale prices we can however estimate the relationship between the ask price and the level of the highest outstanding i e rejected offer that the computer received this allows us to test the implication that sellers with high ask prices are more likely to reject offers of a given level

portfolio choices for homeowners abstract in this paper i show that introducing frictions associated with housing into standard life cycle models can partially resolve the portfolio choice puzzle i calibrate a model in which a representative household endogenously transits from renting to mortgage financed homeownership the household can later adjust housing status either voluntarily or because of a forced move by paying transaction costs it is shown that homeownership crowds out stock market participation risky owner occupied housing substitutes for stocks while bonds provide liquidity young and middle aged households regardless of whether they are currently homeowners hold much less stock than predicted by traditional models without housing

will u s agriculture really benefit from global warming accounting for irrigation in the hedonic approach will u s agriculture really benefit from global warming accounting for irrigation in the hedonic approach wolfram schlenker w michael hanemann and anthony c fisher there has been a lively debate about the potential impact of global climate change on u s agriculture most of the early agro economic studies predict large damages see for example richard m adams 1989 harry m kaiser et al 1993 and adams et al 1995 in an innovative paper robert mendelsohn william d nordhaus and daigee shaw 1994 hereafter mns propose a new approach using the variation in temperature and precipitation across u s counties to estimate a reduced form hedonic equation with the value of farmland as the dependent variable a change in temperature and or precipitation is then associated with a change in farmland value which can be interpreted as the impact of climate change adams et al 1998 characterize the hedonic approach as a spatial analogue approach and acknowledge that the strength of the spatial analogue approach is that structural changes and farm responses are implicit in the analysis freeing the analyst from the burden of estimating the e ects of climate change on particular region speci c crops and farmer responses on the other hand one of the potential disadvantages of the hedonic approach is that it is a partial equilibrium analysis i e agricultural prices are assumed to remain constant 1 while year to year uctuations in annual weather conditions certainly have the potential to impact current commodity prices especially for crops produced only in a relatively localized area such as citrus fruits which are grown mainly in california and florida changes in long run weather patterns i e changes in climate might have a smaller e ect on commodity prices because of the greater potential for economic adaptation particularly shifts in growing regions 2 the hedonic approach as implemented by mns predicts that existing agricultural land on average might be more productive and hence result in bene ts for u s farmers 3 the hedonic approach has received considerable attention in our judgment in part because the conclusions are at variance with those of some other studies

measuring the influence of space and time effects on time on the market this paper is concerned with spatial effects of time on the market for residential property and time varying relationships using a dataset of properties from the adelaide metropolitan area australia during the period 2002 2011 the analysis firstly considers the spatial dependence in time on the market and secondly extends the analysis to a space time model using 2sls regression the findings demonstrate the complexity in spatial analysis with results indicating a random distribution of time on the market in 86 of observations a pattern that is consistent over time spatial autocorrelation is shown to increase time on the market in the subject property while spatial error decreases time on the market in the subject property suggesting a high level of market transparency and improved liquidity the compensating or nullifying effects of both types of spatial association is shown to contribute to the random distribution observed in time on the market a strong explanatory capacity of the business cycle suggests that economic drivers are leading time on the market rather than prices abstract from author

estimating house price indexes in the presence of seller reservation prices we analyze a bias in transaction based price indexes due to the presence of seller reservation prices we develop a model in which the ratio of sellers reservation prices to the market value affects trading volume and biases of observed transaction prices when trading volume decreases increases index returns are estimated with an upward downward bias we propose a new econometric procedure to mitigate the bias and use simulations to demonstrate the effectiveness of the procedure we construct a reserve conditional unbiased index for the los angeles housing market which substantially differs from a traditional repeat sale index

on modeling and interpreting the economics of catastrophic climate change with climate change as prototype example this paper analyzes the implications of structural uncertainty for the economics of low probability high impact catastrophes even when updated by bayesian learning uncertain structural parameters induce a critical tail fattening of posterior predictive distributions such fattened tails have strong im plications for situations like climate change where a catastrophe is theoretically possible because prior knowledge cannot place sufficiently narrow bounds on overall damages this paper shows that the economic consequences of fat tailed structural uncertainty along with unsureness about high temperature damages can readily outweigh the effects of discounting in climate change policy analysis

the impact of global warming on agriculture a ricardian analysis reply we measure the economic impact of climate on land prices using cross sectional data on climate farmland prices and other economic and geophysical data for almost 3 000 counties in the united states we find that higher temperatures in all seasons except autumn reduce average farm values while more precipitation outside of autumn increases farm values applying the model to a global warming scenario shows a significantly lower estimated impact of global warming on u s agriculture than the traditional production function approach and in one case suggests that even without co sub 2 fertilization global warming may have economic benefits for agriculture 16 refs 5 figs 5 tabs

a disequilibrium model of the market for houses implicit selling time as a signal of optimal holding periods and buyer valuation a theoretical model is developed of house market disequilibrium price and quantity adjustments occur as the consequence of inventory adjustment in the absence of a market maker this approach reve

the enduring impact of the american dust bowl short and long run adjustments to environmental catastrophe the 1930 s american dust bowl was an environmental catastrophe that greatly eroded sections of the plains analyzing new data collected to identify low medium and high erosion counties the dust bowl is estimated to have immediately substantially and persistently reduced agricultural land values and revenues during the depression and through at least the 1950 s there was limited reallocation of farmland from activities that became relatively less productive agricultural adjustments such as reallocating land from crops to livestock recovered only 14 to 28 of the initial agricultural cost the economy adjusted predominately through migration rather than through capital inows and increased industry

what is the role of the asking price for a house abstract this paper considers the role of the asking price in housing transactions both theoretically and empirically significant fractions of housing transactions involve sales prices that are either below or above asking price which might suggest that asking price has limited relevance however many housing transactions involve a sales price exactly equal to asking price a fact that has previously drawn little notice strongly suggesting that asking price does matter the paper develops a model where asking price is neither a binding commitment nor a ceiling yet still directs buyer search and impacts sales price using novel survey data the paper provides empirical evidence consistent with asking price playing a directing role in buyer search consistent with theory this effect is stronger for more atypical houses and in bust markets

price level uncertainty indexation and employment uncertainty about future price level is one of the most common features of today s economies yet research on the relationship between unemployment and price changes focused on the level of those changes in his recent nobel lecture on inflation and unemployment milton friedman suggested that an increased variability of actual or anticipated inflation may raise the natural level of unemployment 6 466 observing the tendency of inflation that is high on the average to be highly variable friedman suggested the relationship between unemployment and inflation uncertainty as a possibly explanation for the recently observed positive slope of the philips curve as possible remedies to the detrimental effect of inflation uncertainty friedman suggested a stabilization of the inflation rate through e g a stable monetary expansion and the institution of price indexing the purpose of this paper is to point at a possible relationship between price level uncertainty and the real sector of the economy it is shown that under plausible assumptions about individuals preferences and attitude toward risk an increase in price level uncertainty may bring about a decrease in the level of employment and possibly an increase in unemployment as suggested by friedman these results are also supported by empirical evidence

why the far distant future should be discounted at its lowest possible rate abstract a critical feature of the distant future is currently unresolvable uncertainty about what will then be the appropriate rate of return on capital to use for discounting this paper shows that there is a well defined sense in which the lowest possible interest rate should be used for discounting the far distant future part of any investment project some implications are discussed for evaluating long term environmental projects or activities like measures to mitigate the possible effects of global climate change

length of stay for low cost tourism abstract awareness of tourists length of stay and the factors which determine that is an essential element for good planning and management at tourist destinations this article analyses to what extent the personal characteristics of the low cost tourist those of the trip and stay and those of the destination itself are significant in determining the duration of a trip to this end an econometric duration model is estimated the results obtained show that the effect of time restrictions seem to be relevant for explaining the observed differences in length of stay as well as the effects of the tourist s spending capacity prices and the differences between urban and sun and sand destinations furthermore the model also allows us to analyse changes in the likelihood of the stay being ended at a specific point in time hazard associated with changes in the explanatory variables and to obtain predicted survival times for different groups of tourists

satellites self reports and submersion exposure to floods in bangladesh abstract a burgeoning climate economy literature has uncovered many effects of changes in temperature and precipitation on economic activity but has made considerably less progress in modeling the effects of other associated phenomena like natural disasters we develop new objective data on floods focusing on bangladesh we show that rainfall and self reported exposure are weak proxies for true flood exposure these data allow us to study adaptation giving accurate measures of both long term averages and short term variation in exposure this is important in studying climate change impacts as people will not only experience new exposures but also experience them differently

asset level risk and return in real estate investments relatively little is known in the academic literature about the idiosyncratic returns of individual real estate investments though quite a few commercial properties command prices commensurate with the market values of small to medium publicly traded companies i use purchase and sale data from the national council of real estate investment fiduciaries ncreif to compute holding period price appreciation returns for commercial properties in stark contrast with liquid asset returns idiosyncratic drift and volatility estimates diverge as the holding period shrinks this puzzling phenomenon survives a variety of controls for vintage effects systematic risk heterogeneity and sample selection biases i derive an equilibrium search based illiquid asset pricing model which when calibrated fits the data very well thus a structural model of illiquidity seems crucial to a descriptive theory of real estate investment returns the model can be extended to other illiquid asset classes and used to price derivatives such as debt claims

can openness mitigate the effects of weather shocks evidence from india s famine era transformation of countries throughout history rural citizens in developing countries today however remain highly exposed to fluctua tions in the weather this exposure affects the incomes these citizens earn and the prices of the foods they eat recent work has documented the significant mortality stress that rural house holds face in times of adverse weather robin burgess olivier deschenes dave donaldson and michael greenstone 2009 masayuki kudamatsu torsten persson and david stromberg 2009 famines times of acutely low nominal agricultural income and acutely high food prices are an extreme manifestation of this mapping from weather to death lilian c a knowles 1924 describes these events as agricultural lockouts where both food sup plies and agricultural employment on which the bulk of the rural population depends plummet the result is catastrophic with widespread hun ger and loss of life though now confined to the world s poor est countries food shortages and famines were features of most preindustrial societies over time there has been intense debate over what role openness to trade in food might play in

what do we learn from the weather the new climate economy literature a rapidly growing body of research applies panel methods to examine how temperature precipitation and windstorms influence economic outcomes these studies focus on changes in weather realizations over time within a given spatial area and demonstrate impacts on agricultural output industrial output labor productivity energy demand health conflict and economic growth among other outcomes by harnessing exogenous variation over time within a given spatial unit these studies help credibly identify i the breadth of channels linking weather and the economy ii heterogeneous treatment effects across different types of locations and iii nonlinear effects of weather variables this paper reviews the new literature with two purposes first we summarize recent work providing a guide to its methodologies datasets and findings second we consider applications of the new literature including insights for the damage function within models that seek to assess the potential economic effects of future climate change jel c51 d72 o13 q51 q54

econometric issues in macroeconomic models with generated regressors the paper critically reviews the literature on the econometric issues raised by the use of generated regressors gr in empirical models the economic rationale for the use of gr is considered with examples being drawn from several macroeconomic examples including new classical macroeconomic ncm models which postulate monetary neutrality various estimation methods are discussed for models which include surprise or unexpected terms and the strengths and weaknesses of each approach are investigated drawing upon the work of mcaleer and mckenzie 1991 situations where the typically inefficient two step estimation 2se method will be efficient are highlighted problems of model misspecification and measurement errors are also investigated an empirical section highlights some of the dangers of using uncorrected 2se estimation results through a careful consideration of many recent attempts to test the ncm monetary neutrality hypothesis copyright 1993 by blackwell publishers ltd

a review of the stern review on the economics of climate change the stern review calls for immediate decisive action to stabilize greenhouse gases because the benefits of strong early action on climate change outweighs the costs the economic analysis supporting this conclusion consists mostly of two basic strands the first strand is a formal aggregative model that relies for its conclusions primari ly upon imposing a very low discount rate concerning this discount rate aspect i am skeptical of the review s formal analysis but this essay points out that we are actual ly a lot less sure about what interest rate should be used for discounting climate change than is commonly acknowledged the review s second basic strand is a more intuitive argument that it might be very important to avoid possibly large uncertain ties that are difficult to quantify concerning this uncertainty aspect i argue that it might be recast into sound analytical reasoning that might justify some of the review s conclusions the basic issue here is that spending money to slow global warming should perhaps not be conceptualized primarily as being about consump tion smoothing as much as being about how much insurance to buy to offset the small change of a ruinous catastrophe that is difficult to compensate by ordinary savings

poverty and witch killing many observers have noted that poverty and violence go hand in hand there is a strong negative relationship between economic growth and crime across countries as well as across districts in india and a link between low income and the occurrence of civil war 1 yet existing studies are typically unable to resolve the key econometric identification issues of omitted variable bias and endogeneity to illustrate the unobserved quality of local government institutions may affect both income growth and crime rates and poverty could lead to violence if desperate people with nothing to lose commit more crimes but violence itself may in turn affect economic productivity this paper uses local rainfall variation to identify the impact of income shocks on murder in a rural tanzanian district 2 extreme rainfall resulting in drought or floods is exogenous and is associated with poor harvests and near famine conditions in the region and a large increase in the murder of witches there are twice as many witch murders in years of extreme rainfall as in other years the victims are nearly all elderly women typically killed by relatives these econometric results across 11 years in 67 villages provide novel evidence on the role of income shocks in causing violent crime and religious violence in particular and also provide insights into witchcraft an important social phenomenon in africa rarely studied by economists the view that economic conditions are a driving force behind witch murders is bolstered by the fact that most witch killing in tanzania takes place in poor rural areas largely dependent on rain fed agriculture and that most victims in our sample are from poor households however it is difficult to definitively disentangle this income shock theory from alternative socio cultural explanations the concentration of tanzanian witch murders in a region dominated by one particular ethnic group the sukuma and the especially high number of witch murders in villages where indigenous religious beliefs are strong both point to the important role of non economic factors economic theories and cultural theories are perhaps best viewed as complements the empirical findings demonstrate the power of economics to rationalize a phenomenon that has previously been understood almost solely through a socio cultural lens 3

repeated shocks and preferences for redistribution abstract a society that believes wealth to be determined by random luck rather than by merit demands more redistribution we present evidence of this behavior by exploiting a natural experiment provided by the l aquila earthquake in 2009 which hit a large area of central italy through a series of destructive shakes over eight days matching detailed information on the ground acceleration registered during each shock with survey data about individual opinions on redistribution we show that the average intensity of the shakes is associated with subsequent stronger beliefs that for a society to be fair income inequalities should be leveled by redistribution the shocks however are not all alike we find that only the last three shakes occurred on the fourth and the eighth day of the earthquake have a statistically significant impact overall we find that the timing and repetition of the shocks play a role in informing redistributive preferences

the origins of the canadian wheat boom 1880 1910 completion of the canadian pacific railway was expected to initiate a rush of settlement yet the wheat boom did not materialize until about fifteen years later in addition to causes of the delay already identified this paper proposes another factor the inability of early settlers to cultivate more than a small area of land the paper analyzes reasons for the small sizes of early farms and for their subsequent growth and estimates farm profitability before and after the delay to show how climate and technology affected early prairie farming completion of the canadian pacific railway was expected to initiate a rush of settlement yet the wheat boom did not materialize until about fifteen years later in addition to causes of the delay already identified this paper proposes another factor the inability of early settlers to cultivate more than a small area of land the paper analyses reasons for the small sizes of early farms and for their subsequent growth and estimates farm profitability before and after the delay to show how climate and technology affected early prairie farming

coping with economic and environmental shocks institutions and outcomes moving to higher ground migration response to natural disasters in the early twentieth century areas differ in their propensity to experience natural disasters exposure to disaster risks can be reduced either through migration i e self protection or through public infrastructure investment e g building seawalls using migration data from the 1920s and 1930s this paper studies how the population responded to disaster shocks in an era of minimal public investment we find that on net young men move away from areas hit by tornados but are attracted to areas experiencing floods early efforts to protect against future flooding especially during the new deal era of the late 1930s may have counteracted an individual migration response

implicit house prices variation over time and space in spain asking price has a fundamental influence on market behaviour and understanding how attributes affect the perceived price of housing this paper employs a large database of houses from the spanish housing market to estimate the role of attributes in asking price formation star methodology and glm with random effects are used to extract the price of attributes and the spatial and time pattern results show that the pricing of attributes varies by geographical region and over time with property size and economic and demographic attributes being the key variables explaining asking price formation

temperature and income reconciling new cross sectional and panel estimates this paper presents novel evidence and analysis of the relationship between temperature and income first using sub national data from 12 countries in the americas we provide new evidence that the negative cross country relationship between temperature and income also exists within countries and even within states second we provide a theoretical framework for reconciling the substantial negative association between temperature and income in the cross section with the even stronger short run effects of temperature estimated by panel models the theoretical framework suggests that half of the negative short term effects of temperature may be offset in the long run through adaptation this abstract was borrowed from another version of this item

credit booms and lending standards evidence from the subprime mortgage market this paper links the u s subprime mortgage crisis to demand side factors that contributed to the rapid expansion of the u s mortgage market we show that denial rates were relatively lower in areas that experienced faster credit demand growth and that lenders in these high growth areas attached less weight to applicants loan to income ratios the results are robust to controlling for supply side factors including house price appreciation mortgage securitization and other economic fundamentals and to several robustness tests controlling for endogeneity the results are consistent with the notion that a relaxation of lending standards triggered by an increased demand for loans contributed to the boom and the ensuing crisis together with other supply side explanations these findings shed new light on the relationship between credit booms and financial instability

market thickness and the impact of unemployment on housing market outcomes abstract a search and matching model is developed to study how unemployment influences the housing market in the presence of the thick market effect a structural estimation of the model is conducted based on texas city level data that covers three years 1990 2000 and 2010 simulations help clarify how much the thick market effect amplifies the impact of unemployment a three percentage point increase in the unemployment rate lowers the price by 10 74 and reduces the transaction volume by 5 49 incorporating a feedback mechanism from housing prices to unemployment strengthens the amplification magnitude of the thick market effect

spatial lock in do falling house prices constrain residential mobility abstract falling house prices have caused numerous homeowners to suffer capital losses those with little home equity may be prevented from moving because of imperfections in housing finance markets the proceeds from the sale of their home may be insufficient to repay their mortgage and provide a down payment on a new home a data set of mortgages is used to examine the magnitude of these constraints estimates show that average mobility would have been 24 higher after 3 years had house prices not declined and after 4 years it would have been 33 higher among those with high initial loan to value ratios the differences are even greater

effectiveness of rca institutions to limit local externalities using foreclosure data to test covenant effectiveness residential community associations rcas are said to be an efficient institutional agreement to limit local spillovers while several studies have identified a positive marginal effect of rca rules none have explicitly measured the effectiveness of these institutions to limit local externalities this study measures this effectiveness by estimating how the direct and spillover price impacts caused by foreclosure differ by rca status using a spatial hedonic model that controls for selection bias using propensity score methods and coarsened exact matching we find that foreclosed rca properties experience smaller direct foreclosure discounts and produce smaller spill over effects than their non rca counterparts

when the levee breaks black migration and economic development in the american south abstract in the american south postbellum economic development may have been restricted in part by white landowners access to low wage black labor this paper examines the impact of the great mississippi flood of 1927 on black out migration and subsequent agricultural development flooded counties experienced an immediate and persistent out migration of black population over time landowners in flooded counties modernized agricultural production and increased its capital intensity relative to landowners in nearby similar non flooded counties landowners resisted black out migration however benefiting from the status quo system of labor intensive agricultural production jel j15 j43 n32 n52 n92 q54 r23

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

can cultural norms reduce conflicts confucianism and peasant rebellions in qing china abstract can culture mitigate conflicts triggered by economic shocks in light of the extraordinary emphasis that confucianism places on subordination and pacifism we examine its role in possibly attenuating peasant rebellion within the historical context of china circa 1651 1910 our analysis finds that while crop failure triggers peasant rebellion its effect is significantly smaller in counties characterized by stronger confucian norms as proxied by confucian temples and chaste women this result remains robust after controlling for a long list of covariates and instrumenting confucian norms using ancient confucian sages 500 b c a d 550 to address concerns of measurement error and reverse causality

spatial and temporal efficiency in climate policy applications of fund fund is an integrated assessment model of the interactions between climate and economy nine world regions emit greenhouse gases and suffer damages from climate change a number of greenhouse gas emission reduction policies are compared including optimal and cost effective strategies strategies with early and late abatement and strategies with and without international co operation the analyses confirm that co operation matters resulting in substantially lower costs or higher welfare the real commitments of policy targets based on an absolute level e g 1990 emissions are hard to estimate because of the uncertainties in the baseline postponing action conflicts with minimising costs and maximising welfare but so does sharp emission reduction at the short term as proposed in the kyoto protocol

redlining in boston do mortgage lenders discriminate against neighborhoods historically lenders have been accused of redlining minority neighborhoods as well as refusing to lend to minority applicants considerable bank regulation is designed to prevent both actions however the strong correlation between race and neighborhood makes it difficult to distinguish the impact of geographic discrimination from the effects of racial discrimination previous studies have failed to untangle these two influences in part because of severe omitted variable bias the data set in this paper allows the distinct effects of race and geography to be identified and it shows that the evidence for redlining is weak

the economic effects of climate change greenhouse gas emissions are fundamental both to the world s energy system and to its food production the production of co2 the predominant gas implicated in climate change is intrinsic to fossil fuel combustion specifically thermal energy is generated by breaking the chemical bonds in the carbohydrates oil coal and natural gas and oxidizing the components to co2 and h2o one cannot have cheap energy without carbon dioxide emissions similarly methane ch4 emissions an important greenhouse gas in its own right are necessary to prevent the build up of hydrogen in anaerobic digestion and decomposition one cannot have beef mutton dairy or rice without methane emissions climate change is the mother of all externalities larger more complex and more uncertain than any other environmental problem the sources of greenhouse gas emissions are more diffuse than any other environmental problem every company every farm every household emits some greenhouse gases the effects are similarly pervasive weather affects agriculture energy use health and many aspects of nature which in turn affects everything and everyone the causes and consequences of climate change are very diverse and those in low income countries who contribute least to climate change are most vulnerable to its effects climate change is also a long term problem some greenhouse gases have an atmospheric life time measured in tens of thousands of years the quantities of emissions involved are enormous in 2000 carbon dioxide emissions alone and excluding land use change were 24 billion metric tons of carbon dioxide tco2

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

trends in rainfall and economic growth in africa a neglected cause of the african growth tragedy abstract we examine the role of rainfall trends in poor growth performance of sub saharan african nations relative to other developing countries using a new cross country panel climatic data set in an empirical economic growth framework our results show that rainfall has been a significant determinant of poor economic growth for african nations but not for other countries depending on the benchmark measure of potential rainfall we estimate that the direct impact under the scenario of no decline in rainfall would have resulted in a reduction of between around 15 and 40 of today s gap in african gdp per capita relative to the rest of the developing world

the cyclical behavior of the beveridge curve in the housing market abstract this paper develops a business cycle model of the housing market with search frictions and entry of both buyers and sellers the housing market exhibits a well established cyclical component which features three stylized facts prices move in the same direction as sales and the number of houses for sale but opposite to the time it takes to sell a house these stylized facts imply that in the data housing vacancies and the number of buyers are positively correlated i e that the beveridge curve is upward sloping a baseline search and matching model of the housing market is unable to match these stylized facts because it inherently generates a downward sloping beveridge curve with free entry of both buyers and sellers our model reproduces the positive correlation between prices sales and vacancies and matches the stylized facts qualitatively and quantitatively

evolutionary modelling of the macro economic impacts of catastrophic flood events this paper examines the possible contribution of evolutionary economics to macro economic modelling of flood impacts to provide guidance for future economic risk modelling most macro economic models start from a neoclassical economic perspective and focus on equilibrium outcomes either in a static or dynamic way and describe economic processes at a high level of aggregation as a consequence they typically fail to account for the complexity of social interactions and other behavioural responses of consumers and producers to disasters which may affect the macroeconomic impacts of floods employing evolutionary principles and methods such as agent based modelling may help to address some of the shortcomings of current macro economic models we explore and discuss the implications of applying consumer and producer heterogeneity bounded rationality network effects social and technological learning co evolution and adaptive policy making concepts into existing economic frameworks for the assessment of macro economic impacts of floods authors abstract

estimates of the impact of crime risk on property values from megan s laws abstract we estimate the willingness to pay for reductions in crime risk using the location and move in dates of sex offenders we find significant effects of sex offenders locations that are geographically localized house prices within 0 1 miles of a sex offender fall by 4 percent on average we then use this finding to estimate the costs to victims of sexual offenses and find costs of over 1 million per victim far greater than previous estimates however we cannot reject the alternative hypotheses that individuals overestimate risks posed by offenders or that living near an offender poses significant costs exclusive of crime risk jel k42 r23 r31

the growth aftermath of natural disasters this paper provides a description of the macroeconomic aftermath of natural disasters it traces the yearly response of gross domestic product growth both aggregated and disaggregated into its agricultural and non agricultural components to four types of natural disasters droughts floods earthquakes and storms the paper uses a methodological approach based on pooling the experiences of various countries over time it consists of vector auto regressions in the presence of endogenous variables and exogenous shocks varx applied to a panel of cross country and time series data the analysis finds heterogeneous effects on a variety of dimensions first the effects of natural disasters are stronger for better or worse on developing than on rich countries second while the impact of some natural disasters can be beneficial when they are of moderate intensity severe disasters never have positive effects third not all natural disasters are alike in terms of the growth response they induce and perhaps surprisingly some can entail benefits regarding economic growth thus droughts have a negative effect on both agricultural and non agricultural growth in contrast floods tend to have a positive effect on economic growth in both major sectors earthquakes have a negative effect on agricultural growth but a positive one on non agricultural growth storms tend to have a negative effect on gross domestic product growth but the effect is short lived and small future research should concentrate on exploring the mechanisms behind these heterogeneous impacts

selling labor low wage responses to productivity shocks in developing countries productivity risk is pervasive in underdeveloped countries this paper highlights a way in which underdevelopment exacerbates productivity risk productivity shocks cause larger changes in the wage when workers are poorer less able to migrate and more credit constrained because of such workers inelastic labor supply this equilibrium wage effect hurts workers in contrast it acts as insurance for landowners agricultural wage data for 257 districts in india for 1956 87 are used to test the predictions with rainfall as an instrument for agricultural productivity in districts with fewer banks or higher migration costs the wage is much more responsive to fluctuations in productivity

a european cross country comparison of the impact of homeownership and transaction costs on job tenure de graaff t and van leuvensteijn m a european cross country comparison of the impact of homeownership and transaction costs on job tenure regional studies this paper looks at the impacts across european countries of homeownership and transaction costs on job tenure the analysis is based on a representative household sample of fourteen european countries covering the period 1994 2001 these data are merged with country specific transaction tax data and aggregate homeownership rates similar to previous microeconomic studies the results indicate that homeownership reduces job mobility as well as the probability of becoming unemployed or economically inactive it is found however that this effect is severely mitigated by two factors first it decreases when aggregate homeownership rates are higher thus homeowners have larger job tenures but more so in countries with low homeownership rates second transaction costs on the housing market are positively associated with the probability of becoming

wildfire risk salience housing demand abstract in this paper we develop a parsimonious model that links underlying changes in location specific risk perceptions to housing market dynamics given estimates of both the price and quantity effects induced by shocks to agents beliefs the model allows us to draw inferences about the underlying changes in risk perceptions that gave rise to observed housing market dynamics we apply the model s predictions to an empirical analysis of the influence of severe wildfires on housing prices and sales rates in the front range of colorado interpreted in the context of the model our empirical results suggest that natural disasters lead to significant but short lived increases in risk perceptions

a regional dynamic general equilibrium model of alternative climate change strategies outcomes and noncooperative equilibria this study finds that cooperative policies show much higher levels of emissions reductions than do noncooperative strategies that there are substantial differences in the levels of controls in both the cooperative and the noncooperative policies among different countries and that high income countries may be the major losers from cooperation jel h41 q4 q2 q20

a review of the stern review on the economics of climate change how much and how fast should we react to the threat of global warming the stern review argues that the damages from climate change are large and that nations should undertake sharp and immediate reductions in greenhouse gas emissions an examination of the review s radical revision of the economics of climate change finds however that it depends decisively on the assumption of a near zero time discount rate combined with a specific utility function the review s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today s marketplace real interest rates and savings rates

networks in the modern economy mexican migrants in the u s labor market this paper attempts to identify job networks among mexican migrants in the u s labor market the empirical analysis uses data on migration patterns and labor market outcomes based on a sample of individuals belonging to multiple origin communities in mexico over a long period of time each community s network is measured by the proportion of the sampled individuals who are located at the destination the united states in any year we verify that the same individual is more likely to be employed and to hold a higher paying nonagricultural job when his network is exogenously larger by including individual fixed effects in the employment and occupation regressions and by using rainfall in the origin community as an instrument for the size of the network at the destination

a more timely house price index using listings data we construct a new repeat sales house price index that describes house values at the contract date when the price is determined rather than the closing date when the property is transferred we showthat this difference in timing helps explain several puzzles about house prices including their strong short term serial correlation and their weak correlation with stock prices and macroeconomic news shocks in addition we showthat a variant of our index that relies exclusively on listings data for recent transactions accurately reveals trends in house prices several months before existing price indexes like case shiller become available

poverty and crime in 19th century germany we estimate the impact of poverty on crime in 19th century bavaria germany rainfall is used as an instrumental variable for grain rye prices to address econometric identification problems in the existing literature the rye price was a major determinant of living standards during this period the rye price has a positive effect on property crime a one standard deviation increased property crime by 8 ols estimates are twice as large as instrumental variable estimates highlighting the value of our empirical approach higher rye prices lead to significantly less violent crime though and we argue that higher beer prices caused by the higher rye prices are a likely explanation

the home selling problem theory and evidence this paper formulates and solves the problem of a homeowner who wants to sell their house for the maximum possible price net of transactions costs including real estate commissions the optimal selling strategy consists of an initial list price with subs equent weekly decisions on how much to adjust the list price until the home is sold or withdrawn from the market the solution also yields a sequence of reservation prices that determine whether the homeowner should accept bids from potential buyers who arrive stochastically over time with an expected arrival rate that is a decreasing function of the list price this model was developed to provide a theoretical explanation for list price dynamics and bargaining behavior observed for a sample of homeowners in england in a new data set introduced by

house price shocks negative equity and household consumption in the united kingdom we examine the impact of unanticipated housing capital gains on consumption behavior using data from the british household panel survey and county level house price data we condition the models on household financial expectations and on household real financial capital gains imputed from the family resources survey we find a marginal propensity to consume out of unanticipated shocks to housing wealth of 0 01 omitting the measure of financial expectations biases the results upward we find little evidence of heterogeneity in responses of young and old homeowners but differences between owners and renters we also find asymmetric behavior between house price rises and falls and a disproportionate impact on saving if the household had negative housing equity at the start of the period jel d91 e21 r31 c 2010 by the european economic association

nominal loss aversion housing equity constraints and household mobility evidence from the united states abstract this paper exploits the recent variation in us house prices to examine the effect of equity constraints and nominal loss aversion on household mobility detailed data from the 1985 1996 national longitudinal survey of youth nlsy79 were matched with house price data from 149 metropolitan areas to estimate instrumental variables linear probability and semi parametric proportional hazard models of intra metropolitan mobility household mobility is significantly influenced by nominal loss aversion there is little evidence that low equity because of fallen house prices constrains mobility

short term interest rates as predictors of inflation on testing the hypothesis that the real rate of interest is constant in an innovative and provocative paper in this review eugene fama presents evidence which appears to be consistent with the joint hypothesis that the real rate of interest ignoring taxes is a constant and that the market for u s treasury bills is efficient in the sense of embodying rational expectations those findings are strikingly at variance with a long list of previous studies which seemed to support the view that the real rate of interest varies over time and can be related to economic variables such as real output monetary policy and so forth 2 the methodologies which lead to these contradictory conclusions are quite different previous studies had followed the lead of irving fisher by relating nominal interest rates to distributed lags on past rates of inflation 3 these distributed lags are generally interpreted as approximations to the market s expected rate of inflation and thus any remaining variation is attributed to variation in the real rate 4 fama s methodology on the other hand draws on the fact that the difference between the market interest rate and the subsequently observed rate of inflation the ex post real interest rate consists by definition of the ex ante real interest rate plus a pure forecasting error 5 the hypothesis of market efficiency implies that these forecasting errors must be serially random thus observing ex post real rates is equivalent to observing ex ante real rates with random measurement error these errors of course confound the problem of identifying variation in the ex ante real rate in this paper we will argue that the relative magnitude of these measurement errors is such that the tests carried out by fama were not powerful enough to reject the joint hypothesis that the ex ante real rate is a constant and expectations are rational more powerful tests which are presented in this paper using the same data do lead to rejection of that hypothesis of course rejection