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Publications

Homeownership and the Scarcity of Rentals  (Journal of Monetary Economics, November 2015)  (with Matteo Pignatti)

We model the provision of owner-occupied versus rental housing services as a competitive search economy where households have private information over their expected duration. With public information, households with low vacancy hazard rates pay lower rents and search in thicker markets. With private information, rentals are under-provided to long-duration households to discourage short-duration households from searching there. Ownership is attractive in part because it cures the private information problem.
Using a novel data set of rental market listings, the data show that homeownership rates are high where price-to-rent ratios are high but rental properties are scarce and that long-duration households sort into scarce rental markets, consistent with a private information problem. 
Essex WP version (with double search for owning but otherwise outdated)
Online Appendix

Do Households Use Homeownership To Insure Themselves? Evidence Across U.S. Cities (Quantitative Economics, November 2014) (with M. Amior)   Online Appendix


Are households more likely to be homeowners when “housing risk” is higher? We show that homeownership rates and loan-to-value (LTV) ratios at the city level are strongly negatively correlated with local house price volatility. However, causal inference is confounded by house price levels, which are systematically correlated with housing risk in an intuitive way: in cities where the land value is larger relative to the local cost of structures, house prices are higher and more volatile. We disentangle the contributions of high price levels from high volatilities by building a life-cycle model of homeownership choices. The model is able to explain much of the cross-city dispersion in homeownership and LTV. We find that higher price levels explain the lower homeownership, while higher risk explains the lower LTV in high land value cities. The relationship between LTV and risk highlights the importance of including other means of incomplete insurance in models of homeownership. Finally, we use the model to show why regression-based inferences about the effect of risk on homeownership are biased.


Saving Up or Settling Down: Home Ownership over the Life Cycle (Review of Economic Dynamics, April 2014)

In a Bewley model with endogenous price volatility, home ownership and mobility across locations and jobs, we assess the contribution of financial constraints, housing illiquidities and house price risk to home ownership over the life cycle. The model can explain the rise in home ownership and fall in mobility over the life cycle. While some households rent due to borrowing constraints in the mortgage market, factors that affect propensities to save and move, such as risky house values and transactions costs, are equally important determinants of the ownership rate. (with S. Vasudev)
Full Appendix   (Previously circulated under "Homeownership, Savings and Mobility Over The Life Cycle) 


Working Papers and Work in Progress

The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality (with Lars Neshiem and Florian Oswald)

Using the English Housing Survey, we estimate a supply side selection model of the allocation of properties to the owner-occupied and rental sectors. We find that location, structure and unobserved quality are important for understanding housing prices, rents and selection. Structural characteristics and unobserved quality are important for selection. Location is not. Accounting for selection is important for estimates of rent-to-price ratios and can explain some puzzling correlations between rent-to-price ratios and homeownership rates. We interpret this as strong evidence in favor of contracting frictions in the rental market likely related to housing maintenance.


Optimal Public Housing
(with Lars Neshiem) (coming soon)
We study a system of optimal taxes and transfers under private information (Mirrlees 1971) in an urban setting (Mirrlees 1972). We show that rationed, subsidized housing (i.e. public housing) is generally part of the optimal policy whenever the optimal income tax policy leads to bunching. Under a plausible calibration, this public housing is situated in the high value, downtown area of the city.


The Urban Life Cycle of Households 
(with Lars Neshiem and Florian Oswald) (coming soon)

We build a general equilibrium, heterogeous agent, incomplete markets version of a classic urban residential choice model. House prices and rents are non-linear functions of location and size. We examine why families with young children move and buy homes in suburban areas even though oberservationally similar rentals are relatively cheap. 




Older Work:

Existence of an equilibrium in incomplete markets with discrete choices and many markets  March, 2014

We define and prove the existence of an equilibrium for Bewley-style models of heterogeneous agents in incomplete markets with discrete and continuous choices. Our sample model also features endogenous price volatility across many markets (locations) but still has a steady state equilibrium with a finite-dimensional state space. Our proof of existence uses Kakutani’s Fixed Point Theorem and does not require the set of households that are indifferent between two discrete choices to be measure zero.

Multivariate Fractional Cointegration and GDP Convergence- May, 2005
Abstract:
Tests of convergence in a time series framework are historically univariate and/or in an I(1)-versus-I(0) context. However, convergence hypotheses can and probably should be generalized to include multivariate, fractionally integrated processes. I propose several potential convergence definitions and use semi-parametric tests for bivariate and multivariate fractional cointegration in the G-7 countries. Results indicate possible convergence as well as highlight why other procedures may fail to find convergence.

Plant Level Growth Rates - A case for disaggregating shocks
- May, 2006
Abstract:
Plant and firm level growth rates exhibit significant fat-tailed behavior. I show that these tails still exist after conditioning on some standard explanatory variables like the age and size of a plant, and that the resultant distributions are well-described by a Laplace distribution. I then simulate a simple model which relaxes the standard central limit theorem by allowing for random numbers of random shocks.