Household Sorting with Heterogeneous Productivity Impacts of Flood Risk, Job Market Paper, 2024
Abstract: This paper examines household sorting over flood risk, incorporating heterogeneous impacts of flooding on productivity. Industries are categorized as either Opportunity Sectors or Suffering Sectors, based on whether their productivity is positively or negatively affected by flood risk. Estimation using a nested multispatial sorting model suggests substantial industry-based heterogeneity in the marginal willingness to pay (MWTP) for flood risk reduction, with MWTP markedly lower in Opportunity Sectors. Furthermore, to disentangle the heterogeneous sorting behaviors arising from sector and income channels, a horse-race analysis is conducted. With the novel productivity channel incorporated, the observed divergences across income levels are mostly explained by sectoral dynamics but no evidence of the reverse effect. These findings highlight climate-related productivity as a critical mechanism behind demographic disparities documented in the literature.
High-Temperature and Mortgage Termination, with Yongheng Deng, Teng Li, and Timothy Riddiough, 2024
Abstract: We find that households exposed to high temperature default and prepay at higher rates, with households defaulting more when underwater and prepaying more when above-water on their loans. Areas with multiple climate risks show extreme sensitivity to high temperature. Air conditioning and better access to credit attenuate default responses but not prepayment responses, indicating that heat exacerbates financial stresses associated with negative housing equity. To address housing-mismatch, households that prepay move to cooler areas with less disaster risk. There is only weak evidence of labor market effects on termination responses to high temperatures.
Estimating Benefits and Costs of Land Development, with Lu Han, Christopher Timmins, and Vincent Yao, 2024
Abstract: We estimate the benefits and costs associated with land development using a unified framework. By employing a shift-share instrument and its interaction with the indicator for areas with high flood risk exposure, we find that expected benefits significantly and positively impact home prices, while expected costs have a significant and negative effect. There is also a significant spillover effect on local home prices from nearby land development. Residents in Republican-leaning states value the expected benefits more and discount the costs. Underserved areas, with higher proportions of minorities and lower median incomes, receive lower net benefits compared to other areas, mainly due to lower benefits from nearby land development rather than higher costs.
The Effectiveness and Consequences of the Government’s Interventions for Hong Kong’s Residential Housing Markets, with Yongheng Deng, Teng Li, and Yonglin Wang. Real Estate Economics, 52(2), 324-365. Jan 2024.
Abstract: We study the effectiveness, consequences, and transmission mechanisms of the government's interventions for Hong Kong's residential housing market between 2009 and 2017. We use granular microlevel transaction data and adopt a regression discontinuity design to conduct the empirical analysis. We find that mortgage-tightening measures effectively curbed the overheated market by reducing price and volume while specific submarkets occasionally experienced volatility. Tax-driven measures effectively suppressed trading activity but triggered price volatilities across submarkets. Several rounds of measures had a spillover effect on subsidized public housing. Our findings have implications for policymakers seeking to review and revise property market intervention policies in Hong Kong and elsewhere.
Climate Change and Mortgage Market: Loan Origination and Securitization
Understanding Missing Data in Real-Time Pollution Monitoring System in China