"Understanding Excess Repayment" with Jack Liebersohn and Vikram Jambulapati

Abstract: A value-maximizing household will not make investments with a return below the risk-free rate. We show that this principle is violated in the mortgage market: A large share of households prepay their mortgage even when higher risk-free returns are available. Interest rate increases from 2022-2024 lowered the value of mortgage prepayment, yet borrowers did not prepay less, resulting in $4.6 billion in losses. Prepayment is persistent, widespread, and cannot be explained by inattention or inertia. Instead, evidence points to debt aversion: Prepayment is higher near mortgage completion and among high-credit score, low-debt borrowers. Exogenous cash-flow shocks also increase prepayment.

[1]  "Dope and Disorder: The effects of the reformulation of OxyContin on crime"

Abstract: This paper studies the effect of an exogenous opioid supply shock -- the 2010 reformulation of OxyContin -- on criminal activity. Prior literature has shown that this reformulation had unintended consequences, namely that it resulted in massive spikes in heroin and synthetic opioid use. Using geographic variation in the ex-ante "intensity" of OxyContin prior to the reformulation, I use a difference-in-differences framework to study how increases in illicit opioid use affects crime from 2006-2019. I find that highly exposed areas saw large increases in arrests for heroin possession, but no increases in arrests for the sale of heroin. Further, increases in illicit opioid use has largely no effect on both income-generating and non-income generating crimes. On the other hand, I show evidence that increases in heroin and fentanyl use are associated with an 8% increase in the incidence of homelessness.