Stanford Graduate School of Business School
655 Knight Way
Stanford, CA 94305
NBER Working Papers and Publications
|March 2018||Mortgage Design in an Equilibrium Model of the Housing Market|
with Adam M. Guren, Arvind Krishnamurthy: w24446
How can mortgages be redesigned to reduce housing market volatility, consumption volatility, and default? How does mortgage design interact with monetary policy? We answer these questions using a quantitative equilibrium life cycle model with aggregate shocks, long-term mortgages, and an equilibrium housing market, focusing on designs that index payments to monetary policy. Designs that raise mortgage payments in booms and lower them in recessions do better than designs with fixed mortgage payments. The welfare benefits are quantitatively substantial: ARMs improve household welfare relative to FRMs by the equivalent of 0.83 percent of annual consumption under a monetary regime in which the central bank lowers real interest rates in a bust. Among designs that reduce payments in a bust, we s...
|January 2018||The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco|
with Rebecca Diamond, Franklin Qian: w24181
We exploit quasi-experimental variation in assignment of rent control to study its impacts on tenants, landlords, and the overall rental market. Leveraging new data tracking individuals’ migration, we find rent control increased renters’ probabilities of staying at their addresses by nearly 20%. Landlords treated by rent control reduced rental housing supply by 15%, causing a 5.1% city-wide rent increase. Using a dynamic, neighborhood choice model, we find rent control offered large benefits to covered tenants. Welfare losses from decreased housing supply could be mitigated if insurance against rent increases were provided as government social insurance, instead of a regulated landlord mandate.
|November 2017||Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers During the Great Recession|
with Shai Bernstein, Richard R. Townsend: w24011
We investigate how the deterioration of household balance sheets affects worker productivity, and whether such effects mitigate or amplify economic downturns. To do so, we compare the output of innovative workers who experienced different declines in housing wealth, but who were employed at the same firm and lived in the same area at the onset of the 2008 crisis. We find that, following a negative wealth shock, innovative workers become less productive, and generate lower economic value for their firms. Consistent with a debt-related channel, the effects are more pronounced among those with little home equity before the crisis and those with fewer outside labor market opportunities.
|April 2016||Who Wants Affordable Housing in their Backyard? An Equilibrium Analysis of Low Income Property Development|
with Rebecca Diamond: w22204
We nonparametrically estimate spillovers of properties financed by the Low Income Housing Tax Credit (LIHTC) onto neighborhood residents by developing a new difference-in-differences style estimator. LIHTC development revitalizes low-income neighborhoods, increasing house prices 6.5%, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher income areas causes house price declines of 2.5% and attracts lower income households. Linking these price effects to a hedonic model of preferences, LIHTC developments in low-income areas cause aggregate welfare benefits of $116 million. Affordable housing development acts like a place-based policy and can revitalize low-income communities.