Essays In Housing Markets And Public Finance

This dissertation comprises three research papers on topics at the intersection of housing markets, taxation, and the provision of local public goods. In Chapter 1, I study the economic incidence of the mortgage interest tax deduction -a widespread, expensive, and regressive tax expenditure -by combining a sufficient-statistics approach with direct estimates of the induced effect on house prices. I start with a flexible economic framework that expresses the policy’s distributional impact in terms of a key parameter: the capitalization effect, or the extent to which the deduction increases house prices. I then directly estimate this parameter, drawing on a national database of housing transactions and exploiting sharp variation in tax rates and itemization rules at state borders. Comparing the sale prices of observationally identical homes purchased on either side of a border, I find that a one percentage point increase in the tax rate applied to mortgage interest increases house prices by 0.8%, which is sufficient to erase the tax savings for a first-time borrower when their loan-to-value ratio is under 60%. Finally, I combine the empirical result and the derived incidence expressions to show the distribution of the policy’s impacts among new home-buyers. Accounting for non-itemization rates indicates that average buyers at most incomes do not benefit from the MID, though there is some heterogeneity across income levels and housing markets. Chapter 2 (joint with Fernando Ferreira) proposes and measures a new mechanism underlying the 41% real increase in per-pupil spending between 1990 and 2009. ''Housing disease'' is a fiscal externality originating in local housing markets in which unexpected booms generate extra revenues that schools administrators have incentives to spend, independent of local preferences for provision of public goods. We establish the importance of housing disease by: (i) assembling a novel microdata set containing the universe of housing transactions for a large sample of school districts; and (ii) using the timelines of school district housing booms to disentangle the effects of housing disease from reverse causality and changes in household composition. We estimate housing price elasticities of per-pupil expenditures of 0.16-0.20, which accounts for approximately half of the rise in public school spending. School districts did not boost administrative costs with those additional funds. Instead, they primarily increased spending on instruction and capital projects, suggesting that the cost increase was accompanied by improvements in the quality of school inputs. Finally, Chapter 3 (joint with Blake Heller) provides evidence on the long-term impacts of educational inputs. While it is well-known that certain charter schools dramatically increase students' standardized test scores, there is considerably less evidence that these human capital gains persist into adulthood. To address this matter, we match three years of lottery data from a high-performing charter high school to administrative college enrollment records and estimate the effect of winning an admissions lottery on college matriculation, quality, and persistence. Seven to nine years after the lottery, we find that lottery winners are 10.0 percentage points more likely to attend college and 9.5 percentage points more likely to enroll for at least four semesters. Unlike previous studies, our estimates are powerful enough to uncover improvements on the extensive margin of college attendance (enrolling in any college), the intensive margin (persistence of attendance), and the quality margin (enrollment at selective, four-year institutions). We conclude by providing non-experimental evidence that more recent cohorts at other campuses in the network increased enrollment at a similar rate. Degree Type Dissertation This dissertation is available at ScholarlyCommons: https://repository.upenn. edu/edissertations/3239 Degree Name Doctor of Philosophy (PhD) Graduate Group Applied Economics First Advisor Fernando Ferreira Subject Categories Economics This dissertation is available at ScholarlyCommons: https://repository.upenn. edu/edissertations/3239 ESSAYS IN HOUSING MARKETS AND PUBLIC FINANCE