collateral damage refinancing constraints and regional recessions in the current structure of the u s residential mortgage market a decrease in property values may make it very difficult for homeowners to refinance their mortgages to take advantage of declining interest rates in this papr we show that this form of collateral constraint has greatly reduced refinancing in statds with depressed property markets we outline the interaction between regional recessions and refinancing constraints when adverse economic shocks cause property values in a region to decrease the damage to the collateral makes it difficult or impossible for some homeowners to obtain new mortgages in the recent period this has meant that homeowners in economically depressed regions have been unable to refinance their mortgages to take advantage of declining interest rates this inability to refinance has further economic impacts on the region through lowering the wealth and the discretionary income of local homeowners thereby deepening the regional recession while the possible link between regional declines in property values and refinancing activity has been understood for some time for example monsen 1992 the subject has received very little empirical attention we provide the first quantitative assessment of the impact of constraints arising from regional property market dynamics on refinancing activity to accomplish this we use a new data set on more than thirty five thousand individual mortgages the sample consists of all mortgages serviced by chemical bank with originations between june 1989 and may 1992

the consumption response to predictable changes in discretionary income evidence from the repayment of vehicle loans abstract although the life cycle permanent income hypothesis is the primary framework for understanding household consumption and savings decisions only a few studies have used clearly identifiable income changes to test the basic predictions of the model the estimates produced using this empirical strategy have yet to lead to a consensus of beliefs since the results have both favored and rejected the model this paper contributes to this literature by examining the consumption reaction to predictable increases in discretionary income following the final payment of a vehicle loan using data from the consumer expenditure survey the results show that a 10 increase in discretionary income due to a loan repayment leads to a 2 to 3 increase in nondurable consumption additional analysis suggests that these findings may be explained by the presence of borrowing constraints

are corruption and taxation really harmful to growth firm level evidence exploiting a unique data set containing information about the estimated bribe payments of ugandan firms the authors study the relationship between bribe payments taxes and firm growth in uganda for the period 1995 97 using industry location averages to circumvent the potential problem of endogeneity and to deal with issues of measurement error they find that both the rate of taxation and the rate of bribery are negatively correlated with firm growth for the full data set a one percentage point increase in the bribery rate is associated with three percentage point reduction in firm growth an effect about three times that of taxation moreover after excluding outliers the authors find that bribery has a much greater negative impact on growth and taxation a considerably smaller one this provides some validation of firm level theories of corruption which posit that corruption retards development even more than taxation does

debt deleveraging and the liquidity trap a fisher minsky koo approach in this paper we present a simple new keynesian style model of debt driven slumps that is situations in which an overhang of debt on the part of some agents who are forced into rapid deleveraging is depressing aggregate demand making some agents debt constrained is a surprisingly powerful assumption fisherian debt deflation the possibility of a liquidity trap the paradox of thrift a keynesiantype multiplier and a rationale for expansionary fiscal policy all emerge naturally from the model we argue that this approach sheds considerable light both on current economic difficulties and on historical episodes including japan s lost decade now in its 18th year and the great depression itself

consumer spending and the economic stimulus payments of 2008 abstract we measure the change in household spending caused by receipt of the economic stimulus payments of 2008 using questions added to the consumer expenditure survey and variation from the ran

the response of expenditures to anticipated income changes panel data estimates standard models of intertemporal allocation predict that the time path of expenditures should be independent of the time path of income recently two papers parker 1999 and souleles 1999 have suggested that u s households have a high marginal propensity to spend within year anticipated income changes we use an expenditure survey panel from spain to re examine this issue we exploit two important features of the spanish data first we have quarterly panel data that follows households for more than four quarters second we use the fact that workers are exogenously sorted into one of two payment schemes some receive the same amount each month of the year and others receive an extra payment in june and december the extra payment is large and predictable we examine the detailed pattern of expenditures over the year to see whether they differ between the two groups we fail to find even weak differences we complement this with a conventional euler equation analysis of excess sensitivity our predicting equation for quarterly earnings growth is much better than usual and is likely to give a powerful test of the hypothesis that predictable changes in income do not lead to changes in expenditure patterns the results of this analysis confirm the graphical analysis we find no evidence of excess sensitivity we conclude that households in normal times do smooth consumption over the year we suggest a reconciliation of our results with those of parker and souleles

homeowner borrowing and housing collateral new evidence from expiring price controls i empirically analyze how changes to the collateral value of real estate assets affect homeowner borrowing behavior while previous research has documented a positive relationship between house prices and home equity based borrowing a key empirical challenge has been to disentangle the role of collateral constraints from that of wealth effects in generating this relationship to isolate the role of collateral constraints i exploit the expiration of resale price controls on owner occupied housing units created through an inclusionary zoning regulation in montgomery county maryland because the duration and stringency of the price controls are set by formula and known in advance their expiration has no effect on expected lifetime wealth but directly shocks collateralized borrowing capacity using data on all transactions and loans secured against every property in the county from 1997 2012 i estimate that the marginal propensity to borrow out of increases in housing collateral induced by expiring price controls is between 0 04 and 0 13 the magnitude of this effect is correlated with a homeowner s initial leverage and indicates that a significant fraction of the additional borrowing arising from house price increases is due to relaxing collateral constraints additional analysis of residential investment and ex post loan performance further suggests that borrowers used at least some portion of the extracted funds to finance current consumption and investment expenditures these results highlight the importance of collateral constraints for homeowner borrowing and suggest a potentially important role for house price growth in driving aggregate consumption

the reaction of household consumption to predictable changes in social security taxes the key implication of rational expectations and the basic life cycle permanent income hypothesis that predictable changes in income have no effect on the growth rate of consumption expenditures is examined this implication is important for understanding the effectiveness and optimal timing of fiscal policy the causes and propagation of business cycles and the effects of income fluctuations on the growth rate of the economy using household level consumption data from the consumer expenditure survey whether expenditures on nondurable goods increase contemporaneously with predictable changes in social security tax withholding is tested it is found that households do change their consumption expenditures in response to the predictable fluctuations in income induced by the social security tax system

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

child labor and schooling responses to access to microcredit in rural bangladesh microcredit has been shown to be effective in reducing poverty in many developing countries however less is known about its effect on human capital formation in this paper we develop a model examining the relation between microcredit and child labour we then empirically examine the impact of access to microcredit on children s education and child labour using a new and large data set from rural bangladesh we address the selection bias using the instrumental variable method where the instrument relies on an exogenous variation in treatment intensity among households in different villages the results show that household participation in a microcredit program may increase child labour and reduce school enrolment the adverse effects are more pronounced for girls than boys younger children are more adversely affected than their older siblings and the children of poorer and less educated households are affected most adversely our findings remain robust to different specifications and methods and when corrected for various sources of selection bias

house prices collateral and self employment this paper explores the role of the collateral lending channel to facilitate small business starts and self employment in the period before the financial crisis of 2008 we document that between 2002 and 2007 areas with a bigger run up in house prices experienced a strong increase in employment in small businesses compared to employment in large firms in the same industries this increase in small business employment was particularly pronounced in industries that need little startup capital and can thus more easily be financed out of increases in housing as collateral our results highlight the importance of the collateral lending channel during the period of the house price boom in the creation of small establishments we show that this effect is separate from the aggregate demand channel that relies on home equity based borrowing leading to increased demand and employment creation

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

does greater accountability improve the quality of public service delivery evidence from uganda summary it is now widely realized that in many developing countries the low quality of public services and governance can limit the scope for poverty reduction and growth empirical micro level evidence on the scope for improved accountability to help reduce corruption and improve the quality with which critical public services are provided is however limited using a large data set from uganda to address this issue we find that household knowledge on how to report inappropriate behavior by bureaucrats and unsatisfactory quality of services does help to not only reduce the incidence of corruption but is also associated with significant improvements in service quality

parental altruism and the value of avoiding acute illness are kids worth more than parents abstract a model describing parents preferences to relieve their own and their children s acute illnesses is estimated using stated preference data estimated marginal rates of substitution mrs between child and parent illness are about two indicating that parents value children s illness attributes twice as highly as their own the mrs is larger for younger children falls toward unity as the child approaches adulthood and appears to reflect parental altruism rather than parent child differences in initial health or illness costs intra family allocations may compensate for chronic health impairments parents willingness to pay to avoid own or child illness increases with income declines with fertility increases at a decreasing rate with duration and number of symptoms and depends on perceived discomfort and activity restrictions current methods of assessing morbidity benefits of environmental regulations may understate substantially the value of children s health particularly in african american families

carbon sequestration and the optimal management of new hampshire timber stands abstract this paper explores the tradeoff between resource extraction and net carbon sequestration in managing representative timber stands in the state of new hampshire in the northeastern united states in the absence of policies to promote forest carbon storage land owners have incentives to employ clear cut harvesting regimes with relatively short rotation periods under conservative assumptions regarding the social benefits of carbon storage optimal rotation periods are extended by between 16 and 133 years depending on the forest type under consideration if policy makers pursued a cost effective strategy to stabilize atmospheric carbon dioxide concentrations at twice the pre industrial norm optimal rotation periods would be extended by a full 180 347 years the analysis suggests that partial harvesting regimes in which approximately 35 of timber volume is removed at 15 year intervals after the timber stand reaches an initial age of 45 years provide relatively high net benefits under a variety of circumstances this finding is relevant because partial harvesting is an accepted and relatively common practice that could be adopted more widely

the economics of urban afforestation insights from an integrated bioeconomic health model abstract urban afforestation programs are starting to act on the growing body of evidence that nature and greenspace are important determinants of well being however there are a lack of credible investigations into the long term returns on investment of afforestation inclusive of positive and negative externalities project related costs and dynamic environmental feedbacks using the new york city forest canopy as an example our integrated bioeconomic health model illustrates that investments in afforestation produce per planted tree net benefits that are significantly lower than previous similarly comparable estimates 12 vs 172 and are nonlinear in canopy size we also show that a reduction in urban air quality such as those that may be produced by changes in national air quality policies and enforcement can be mitigated through increased investment in urban afforestation our results have significant public policy implications for urban environmental quality initiatives

the effect of informal networks on corruption in education evidence from the household survey data in bangladesh abstract using the 2007 household survey data collected by transparency international bangladesh we examine corruption in the education sector in bangladesh our main findings are i the incidence of corruption and the amount of bribe increase with the level of red tape ii poorer households households with a less educated household head and households with girls studying in school are more likely to be victims of corruption iii households with higher social status are more likely to use informal networks to bypass the red tape or pay less amount of a bribe and as a result iv corruption is likely to be regressive

housing market spillovers evidence from the end of rent control in cambridge massachusetts we measure the capitalization of housing market externalities into residential housing values by studying the unanticipated elimination of stringent rent controls in cambridge massachusetts in 1995 pooling data on the universe of assessed values and transacted prices of cambridge residential properties between 1988 and 2005 we find that rent decontrol generated substantial robust price appreciation at decontrolled units and nearby never controlled units accounting for a quarter of the 7 8 billion in cambridge residential property appreciation during this period the majority of this contribution stems from induced appreciation of never controlled properties residential investment explains only a small fraction of the total

business culture and tax evasion why corruption and the unofficial economy can persist abstract this paper shows that business and tax inspection culture can create multiple equilibria in bad equilibria high cheating and corruption increases in penalties or auditing can have perverse impacts and increase cheating the source of the multiple equilibria is the externalities created by business and tax inspection cultures as tax evasion and corruption become more common they become more acceptable and their cost is lowered a third externality that between firms and inspectors is the source of the perverse effect more cheating by firms is good for bribe taking inspectors and more bribe taking inspectors are good for cheating firms

the life cycle model of consumption and saving a central implication of life cycle models is that agents smooth consumption we review the empirical evidence on smoothing at frequencies from within the year up to across a lifetime we find that life cycle models particular those which incorporate realistic features of markets and goods have more empirical successes than failures we also show that some apparent deviations from theoretical predictions imply very small welfare losses for agents finally we emphasize that the coherence of life cycle models imposes an important discipline when incorporating new features into models

the spending and debt response to minimum wage hikes abstract immediately following a minimum wage hike household income rises on average by about 250 per quarter and spending by roughly 700 per quarter for households with minimum wage workers most of the spending response is caused by a small number of households who purchase vehicles furthermore we find that the high spending levels are financed through increases in collateralized debt our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock jel d12 d14 d91 j38

does forest loss increase human disease evidence from nigeria it is estimated that about one quarter of the global disease burden in terms of healthy life years lost and about one quarter of all premature deaths can be attributed to modifiable environmental factors pruss ustun and corvalan 2006 three infectious diseases diarrhea respiratory infections and malaria account for the largest absolute burden in developing countries with children facing the greatest impacts there is a growing body of evidence demonstrating the health burden of air and water pollution as well as important productivity and income effects see for example reviews of the literature in pattanayak and pfaff 2009 and greenstone and jack 2016 studies that focus on the impacts of natural resource degradation are fewer notably garg 2016 provides the first causal estimates of the impact of sustained forest cover on reduced malarial incidence in indonesia demonstrating a large and previously understudied cost of forest cover loss in this paper we extend this new literature on the health impacts of environmental degradation by estimating the causal impact of forest loss on infectious disease incidence in young children using temporal and spatial variation in the last decade in nigeria our estimation strategy involves geolinking a new high resolution dataset of global forest change to child level health data from the nigeria demographic and health surveys from 2008 and 2013 we find that forest loss significantly increases the incidence of malaria though it does not affect the incidence of diarrhea and respiratory diseases the impact of forest loss on malaria is large one standard deviation of forest loss increases malaria incidence by around 4 5 percent in children under five and the dynamic pattern of the impact suggests a temporary ecological disturbance consistent with findings in garg 2016 and the tropical medicine literature

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

what determines corruption international evidence from microdata this paper uses a microlevel data set from 49 countries to create a direct measure of corruption which portrays the extent of bribery as revealed by individuals who live in those countries in addition it investigates the determinants of being asked for a bribe at the individual level the results show that both personal and country characteristics determine the risk of exposure to bribery examples are gender income education marital status the city size the country s unemployment rate average education and the strength of the institutions in the country jel k4 d73 p16

house price appreciation liquidity constraints and second mortgages abstract this paper analyzes how households use second mortgages in response to shocks to housing wealth two related questions are examined do households use home equity in response to house price appreciation are liquidity constraints important for homeowners a theoretical model shows that liquidity constrained households respond more strongly to house price changes than unconstrained households using psid i find noteworthy differences in borrowing patterns of homeowners by the ratio of wealth to income low wealth to income homeowners exhibit a strong reaction to house price appreciation whereas high wealth to income ones do not the results indicate the importance of liquidity constraints among homeowners

bureaucratic corruption and income evidence from the land sector in bangladesh we examine for the first time the effects of corruption on income using household survey data from a developing country estimating the effects of corruption on income is challenging because of the simultaneous relationship between the two variables we use a two step instrumental variable approach to identify the effects of corruption on income we find that after adjusting for simultaneity bias the act of bribery reduces income and that higher bribes have a negative effect on income taken together our results provide a possible explanation why a vicious cycle between corruption and income inequality does not exist in the land sector in bangladesh

intertemporal consumption and credit constraints does total expenditure respond to an exogenous shock to credit there is continuing controversy over the importance of credit constraints this paper investigates whether total household expenditure and debt is affected by an exogenous increase in access to credit provided by a credit market reform that enabled danish house owners to use housing equity as collateral for consumption loans we find that the magnitude of the response is correlated with the amount of equity released by the reform and that the effect is strongest for younger households even for this group the response was moderate the aggregate effect of the reform was significant but small

home is where the equity is mortgage refinancing and household consumption applying a permanent income model with exogenous liquidity constraints and mortgage behavior household refinancing when mortgage interest rates are historically high and rising a persistent empirical puzzle is explained using data from the panel study of income dynamics households experiencing an unemployment shock and having limited initial liquid assets to draw upon are shown to have been 25 more likely to refinance 1991 94 on average such liquidity constrained households converted over two thirds of every dollar of equity they removed into current consumption as mortgage rates plummeted 1991 94 producing an estimated expenditure stimulus of at least 28 billion