26 April 2013
, Antoinette Schoar
, and Felipe Severino
find that areas that experienced stronger increases in housing prices between 2002 and 2007, before the financial crisis of 2008, saw employment in small businesses grow more than employment within large firms in the same industries. This small-business employment growth was especially strong in industries that need little startup capital and thus can be financed more easily by the use of increased housing collateral.
25 April 2013
, Michael Norton
, Emmanuel Saez
, and Stefanie Stantcheva
analyze about 5,000 online survey responses from individuals who had received information about U.S. income inequality, the link between top income tax rates and economic growth, and the estate tax. They find that receiving that information has an effect on whether survey respondents view inequality as an important problem, but it does not significantly change their views about policy and redistribution. The exception is informing survey respondents that the estate tax affects only the very richest families: that has a large effect on support for the estate tax.
24 April 2013
After merging confidential micro-data underlying the BLS Producer Price Index with stock price data for individual firms from NYSE Trade and Quote, Yuriy Gorodnichenko
and Michael Weber
find that the premium for holding the portfolio populated by firms with the stickiest prices relative to the portfolio populated by firms with the most flexible prices is up to 4 percent per year, even after controlling for standard risk factors. They then calculate the response of returns for firms with different frequencies of price adjustment over a narrow time window around press releases of the Federal Open Market Committee, signaling changes in the Federal Funds rate, and find that returns for firms with stickier prices exhibit greater volatility after monetary shocks than returns of firms with more flexible prices.
23 April 2013
When a bank borrows short term but lends long term at fixed rates, any increase in the short-term interest rate reduces its cash flows and increases its leverage. When issuing equity is expensive, the bank is likely to reduce lending in order to offset this rise in leverage. Augustin Landier
, David Sraer
, and David Thesmar
use quarterly bank holding company data on banks with more than $1bn of total assets covering 1986 to 2011 to measure the “income gap” of each bank -- the difference between the dollar amount of the banks' assets that re-price or mature within a year and the dollar amount of liabilities that re-price or mature within a year. They find that banks do not fully hedge their interest rate exposure. Quantitatively, a 100-basis point increase in the Fed funds rate induces a bank at the 75th percentile of the income gap distribution to increase lending by about 1.6 percentage points annually relative to a bank at the 25th percentile.
22 April 2013
How can the consequences of population aging in industrialized countries be mitigated? Edgar Vogel
, Alexander Ludwig
, and Axel Börsch-Supan
find that increasing the retirement age would raise labor market participation of the elderly with little detrimental effect on those already working. They conclude that "labor market policies focusing at the extensive margin (by increasing the retirement age) and adjustments at the education margin" are the key to mitigating the potentially adverse effects of demographic change.