NBER Working Papers by Donghoon Lee

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Working Papers

November 2015The Option Value of Human Capital: Higher Education and Wage Inequality
with Sang Yoon Lee, Yongseok Shin: w21724
Going to college is a risky investment in human capital. However, we highlight two options inherently embedded in college education that mitigate this risk: (i) college students can quit without completing four-year degrees after learning about their post-graduation wages and (ii) college graduates can take jobs that do not require four-year degrees (i.e., underemployment). These options reduce the chances of falling in the lower end of the wage distribution as a college graduate, rendering standard mean-variance calculations misleading. We show that the interaction between these options and the rising wage dispersion, especially among college graduates, is key to understanding the muted response of college enrollment and graduation rates to the substantial increase in the college wage pre...
August 2012A New Look at Second Liens
with Christopher J. Mayer, Joseph Tracy: w18269
We use data from credit report and deeds records to better understand the extent to which second liens contributed to the housing crisis by allowing buyers to purchase homes with small down payments. At the top of the housing market second liens were quite prevalent, with as many as 45 percent of home purchases in coastal markets and bubble locations involving a piggyback second lien. Owner-occupants were more likely to use piggyback second liens than investors. Second liens in the form of home equity lines of credit (HELOCs) were originated to relatively high quality borrowers and originations were declining near the peak of the housing boom. By contrast, characteristics of closed end second liens (CES) were worse on all these dimensions. Default rates of second liens are generally simila...

Published: A New Look at Second Liens, Donghoon Lee, Christopher Mayer, Joseph Tracy. in Housing and the Financial Crisis, Glaeser and Sinai. 2013

April 2011Household Debt and Saving During the 2007 Recession
with Rajashri Chakrabarti, Wilbert van der Klaauw, Basit Zafar: w16999
Using administrative credit report records and data collected through several special household surveys we analyze changes in household debt and savings during the 2007 recession. We find that while different segments of the population were affected in distinct ways, depending on whether they owned a home, whether they owned stocks and whether they had secure jobs, the crisis' impact appears to have been widespread, affecting large shares of households across all age, income and education groups. In response to their deteriorated financial situation, households reduced their average spending and increased saving. The latter increase - at least in 2009 - did not materialize itself through an increase in contributions to retirement and savings accounts. If anything, such contributions actual...

Published: Household Debt and Saving during the 2007 Recession, Rajashri Chakrabarti, Donghoon Lee, Wilbert van der Klaauw, Basit Zafar. in Measuring Wealth and Financial Intermediation and Their Links to the Real Economy, Hulten and Reinsdorf. 2015

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