Research

WORKING PAPERS

“Is anybody home? The impact and taxation of non-resident buyers”

This paper examines the sensitivity of non-resident owners of second homes to targeted annual property taxes using a 2013 change to New York City's property tax treatment of condominiums. It then uses the induced reduction in demand to investigate the impact that the entry of this type of buyer has on housing prices. I estimate an average elasticity of non-resident owners to targeted property taxation of -0.6. There is evidence though that this sensitivity to taxation is higher for higher price properties. Non-resident buyers are shown to have a significant impact on house prices within a subset of highly desirable neighborhoods, but no impact on prices outside of these areas. These results provide a key input for revenue projections from targeted non-resident taxation and clarify the impact of non-resident purchases on housing affordability.

“Inferring expectations from homeownership decisions: House price forecasts during a boom and bust”

Changing expectations of future house price growth are thought to play an important role in housing boom and bust cycles, but investigating such hypotheses is difficult as expectations are not directly observable. This paper develops a new measure of expected house price appreciation based on variation in household level tenure choice decisions both across cities and over time. I use this measure to document shifts in expectations in the recent U.S. housing boom and bust. Evidence is also provided that the process governing household forecasts of future price appreciation and the factors driving expectations vary over time.

"The efficacy of hiring credits in distressed areas" (with Jorge Pérez)

We analyze the efficacy of hiring tax credits, particularly in distressed labor markets. These types of programs have proven hard to assess as their introduction at the state level tends to be endogenous to local conditions and future prospects. We conduct an empirical study of a hiring tax credit program implemented in North Carolina in the mid 1990s, which has a quasi-experimental design. Specifically, the 100 counties in the state are ranked each year by a formula trying to capture their economic distress level. The generosity of the tax credits jumps discontinuously at various ranking thresholds. We estimate the impact of the credits using difference in differences and regression discontinuity methods. Our estimates show fairly sizable and robust impacts on unemployment - a $9,000 credit leads to a nearly 0.5 percentage points reduction in the unemployment rate. The attendant increase in employment levels appears to be around 3%.

"Proximity and productivity: Localization economies in the office sectors" (PDF)

How tightly must firms cluster to receive the benefits of agglomeration? This paper exploits changes in the spatial distribution of office stock during a recent commercial construction boom to provide partially exogenous variation in the potential for local interactions between firms at two different geographic scales. The focus is also on office-based industries for which less empirical evidence on agglomeration effects exists. The magnitude of productivity differences driven by variation in the within city density of economic activity are estimated using both wage and output data. There is significant evidence of localization economies for these sectors. Furthermore, results demonstrate that proximity of firms in the central business district, rather than the overall presence of a sector in the broader metropolitan area, drive estimated agglomeration effects.

RESEARCH IN PROGRESS

Banking fees and neighborhood socioeconomic status (with Marco Migues)

Housing market linkages between high and low skill workers (with Ingrid Ellen and Davin Reed)

PUBLICATIONS

"Neighbors and networks: The role of social interactions on the residential choices of housing choice voucher holders" (with Ingrid Ellen and Gerard Torrats-Espinosa) Journal of Housing Economics, Vol. 43, 2019, 56-71. (link)

The housing choice voucher program aims to reduce housing cost burdens as well as to enable recipients to move to a broader diversity of neighborhoods. Prior evidence shows voucher recipients still end up in neighborhoods with relatively high poverty rates and low performing schools. These constrained neighborhood choices can in part be attributed to landlord discrimination and the geographic concentration of units that rent below voucher caps. In this paper, we consider an additional explanation: the role of information and social influence in determining the effective set of potential housing choices. Using a strategy based on proximity of households in origin census tracts, we find evidence consistent with social influence effects being present in the neighborhood choices of voucher holders. Pairs of households living within the same or adjacent buildings are significantly more likely to relocate to the same neighborhood as each other than are more distant households within the same origin neighborhood. Further, we show that voucher holders who move to the same neighborhood as a nearby voucher holder end up on average in neighborhoods that have higher poverty rates, lower levels of labor market engagement, and higher exposure to environmental hazards—in both absolute terms and relative to other voucher holders from their same origin tract.

"Assessment of the Regional Economic Impacts of Catastrophic Events: CGE Analysis of Resource Loss and Behavioral Effects of an RDD Attack Scenario" (with J. A. Giesecke, W. J. Burns, A. Barrett, E. Bayrak, A. Rose, and P. Slovic) Risk Analysis, Vol. 32, 2012, 583-600. (PDF)

We investigate the regional economic consequences of a hypothetical catastrophic event—attack via radiological dispersal device (RDD)—centered on the downtown Los Angeles area. We distinguish two routes via which such an event might affect regional economic activity: (i) reduction in effective resource supply (the resource loss effect) and (ii) shifts in the perceptions of economic agents (the behavioral effect). The resource loss effect relates to the physical destructiveness of the event, while the behavioral effect relates to changes in fear and risk perception. Both affect the size of the regional economy. RDD detonation causes little capital damage and few casualties, but generates substantial short-run resource loss via business interruption. Changes in fear and risk perception increase the supply cost of resources to the affected region, while simultaneously reducing demand for goods produced in the region. We use results from a nationwide survey, tailored to our RDD scenario, to inform our model values for behavioral effects. Survey results, supplemented by findings from previous research on stigmatized asset values, suggest that in the region affected by the RDD, households may require higher wages, investors may require higher returns, and customers may require price discounts. We show that because behavioral effects may have lingering long-term deleterious impacts on both the supply-cost of resources to a region and willingness to pay for regional output, they can generate changes in regional gross domestic product (GDP) much greater than those generated by resource loss effects. Implications for policies that have the potential to mitigate these effects are discussed.

"Federal Financial Exposure to Natural Catastrophe Risk" (with J. David Cummins and George Zanjani), chapter in NBER volume: Measuring and Managing Federal Financial Risk, Ed. Deborah Lucas, 2010, 61-92. (PDF)

Disaster assistance is a large and continuous liability to the Federal Government, which increases with the value of infrastructure exposed to catastrophes. Though we are accustomed to think of catastrophes as unpredictable, our analysis demonstrates that it is possible to forecast expected future costs for disaster assistance. Knowing the magnitude of these figures can inform both the budgeting process and, ultimately, the design of disaster relief policy.

"The Impact of Tax Law Changes on Bank Dividend Policy, Sell-offs, Organizational Form, and Industry Structure" (with Hamid Mehran), Federal Reserve Bank of New York Staff. Reports, no. 369, 2009. (PDF)

This paper investigates the effect at the bank and industry level of a 1996 tax law change allowing commercial banks to elect S-corporation status. By the end of 2007, roughly one in three commercial banks had either opted for or converted to the S-corporation form of organization. Our study analyzes the effect of this conversion on bank dividend payouts. It also examines the effect S-corporation status has on a community bank’s likelihood of sell-off and measures a firm’s sensitivity to tax rates based on its choice of organizational form. We document that dividend payouts increase substantially after a bank’s conversion to S status. Moreover, community banks that convert are significantly less likely to be sold than their C-corporation peers. We estimate a tax rate elasticity of conversion in the range of 2 to 3 percent for every 1-percentage-point change in relative tax rates. Overall, our results provide evidence that Subchapter S status has significant effects on bank conduct and industry structure.