NEWS, BLOGS etc.
My paper on
the mortgage interest
deduction and its impact on homeownership decisions (joint with Tracy
Turner) is now forthcoming at the Review of Economics and
Statistics.
My paper on the origins of land use regulations (joint with Frederic Robert-Nicoud) is now published at the Journal of Urban Economics. (link to latest discussion paper version) (related VoxEU column on causes and consequences of land use regulations) (related LSE press release)
Recent blogs on interesting topics and
covering my research:
My work (with Paul Cheshire) was recently featured in The Economist's Free Exchange column on Concrete gains: America's big cities are larger than Europe's. That has important economic consequences (2012/10).
Position:
Research interests:
Contact details:
PUBLICATIONS (links provide access to publication (normally £) or latest discussion paper) ARTICLES IN ENGLISH "The Mortgage Interest Deduction and Its Impact on Homeownership Decisions," with Tracy Turner, Review of Economics and Statistics, forthcoming. (discussion paper)
Abstract:
This
paper examines the impact of the combined U.S. state and federal mortgage
interest deduction (MID) on homeownership attainment, using data from 1984
to 2007 and exploiting variation in the subsidy arising from changes in the
MID within and across states over time. We test whether capitalization
of the MID into house prices offsets the positive effect on homeownership. We find that the MID only boosts homeownership attainment of higher income
households in less tightly regulated housing markets. In more
restrictive places an adverse effect exists. The MID is an ineffective
policy to promote homeownership and improve social welfare.
"On the Origins of Land Use Regulations: Theory and Evidence from US metro areas," with Frederic Robert-Nicoud, Journal of Urban Economics, 2013, Vol. 75, 29-43. (publication) (CEPR discussion paper) (discussion paper)
Abstract: We model residential land use constraints as the outcome of a political economy game between owners of developed and owners of undeveloped land. Land use constraints benefit the former group via increasing property prices but hurt the latter via increasing development costs. In this setting, more desirable locations are more developed and, as a consequence of political economy forces, more regulated. These predictions are consistent with the patterns we uncover at the US metropolitan area level.
"Capitalization of Central Government Grants into Local House Prices: Panel Data Evidence from England," with Teemu Lyytikainen and Wouter Vermeulen, Regional Science and Urban Economics, 2011, Vol. 41, No. 4, 394-406. (publication) (discussion paper)
Abstract:
We explore the impact of central government grants on local house prices in
England using a panel data set of local authorities (LAs) from 2001 to 2008.
Electoral targeting of grants to LAs by the incumbent national government
provides an exogenous source of variation in grants that we exploit to
identify their causal effect on house prices. Our results indicate
substantial or even full capitalization. We also find that house prices
respond more strongly in locations in which new construction is constrained
by physical barriers. Our results imply that (i) during our sample period
grants were largely used in a way that is valued by the marginal homebuyer
and (ii) increases in grants to a LA may mainly benefit the typically better
off property owners (homeowners and absentee landlords) in that LA.
"New Housing Supply and the Dilution of Social Capital," Journal of Urban Economics, 2010, Vol. 67, No. 3, 419-437. (publication) (discussion paper)
Abstract: This paper examines the role of local housing supply conditions for social capital investment. Using an instrumental variables approach and data from the Social Capital Community Benchmark Survey, it is documented that the positive link between homeownership and individual social capital investment is largely confined to more built-up neighborhoods (with more inelastic supply of new housing). The empirical findings provide support for the proposition that in these localities house price capitalization provides additional incentives for homeowners to invest in social capital. The findings are also largely consistent with the proposition that built-up neighborhoods provide protection from inflows of newcomers that could upset a mutually beneficial equilibrium involving reciprocal cooperation. However, the results do not appear to be driven by selection based on inherent differences in social aptitudes or by Tiebout sorting.
"Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania," with Ioan Voicu, Regional Studies, 2010, Vol. 44, No. 3, 355-371. (publication) (discussion paper)
Abstract: We exploit the large inflow of FDI into Romania, after the revolution in 1989, to study the determinants of FDI location in transition economies. Using a conditional logit setup and choice-specific fixed effects, we find that external economies from service agglomeration are the main determinant of FDI-location. An increase in service employment density by 10 percent makes the average Romanian county 11.9 percent more likely to attract a foreign investor. Industry specific foreign and domestic agglomeration economies and labor conflicts also impact FDI-location. A comparison with findings of other studies suggests that service agglomeration economies may be geographically quite localized.
"Why Do Households Without Children Support Local Public Schools? Linking
House Price Capitalization to School Spending," with Christopher Mayer,
Journal of Urban Economics, 2009, Vol. 65, No. 1, 74-90.
Abstract: While residents receive similar benefits from many local government programs, only about one-third of all households have children in public schools. We argue that capitalization of school spending into house prices can encourage even childless residents to support spending on schools. We identify a proxy for the extent of capitalization - the supply of land available for new development - and show that towns in Massachusetts with little undeveloped land have larger changes in house prices in response to a plausibly exogenous spending shock. Towns with little available land also spend more on schools. We extend these results using data from school districts in 46 states, showing that per pupil spending is positively related to the percentage of developed land. This positive correlation persists only in districts where the median resident is a homeowner and is stronger in districts with more elderly residents who do not use school services and have a shorter expected duration in their home. Our findings support models in which capitalization encourages the provision of durable local public goods and provides an additional reason why some elderly support local school spending.
(Supplementary material associated with this article can be found, in the
online version, at doi: 10.1016/j.jue.2008.09.001)
"Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge," with Paul Cheshire, Economic Journal, 2008, Vol. 118, Issue 529, F185-F221. (publication) (discussion paper)
"Explaining the Black-White Homeownership Gap: The Role of Own Wealth, Parental Externalities and Locational Preferences," with Yingchun Liu, Journal of Housing Economics, 2008, Vol. 17, No. 2, 152-174. (publication) (discussion paper)
"An Empirical Test of the Theory of Sales: Do Household Storage Constraints Affect Consumer and Store Behavior?," with David Bell, Quantitative Marketing and Economics, 2006, Vol. 4, No. 2, 87-117. (lead article) (publication) (discussion paper)
"Neighborhood Externality Risk and the Homeownership Status of Properties," Journal of Urban Economics, 2005, Vol. 57, No. 2, 213-241. (lead article) (publication) (discussion paper)
"School Funding Equalization and Residential Location for the Young and the Elderly," with Christopher J. Mayer, Brookings-Wharton Papers on Urban Affairs 2004, Issue 5, 107-148. (publication) (discussion paper) ARTICLES IN GERMAN "Der Einfluss von Preisaenderungen auf Angebot und Nachfrage von Immobilien: Theorie, empirische Evidenz und Implikationen," Zeitschrift fuer Immobilienoekonomie (German Journal of Property Research), Issue 1/2007, 5-20. (lead article; with extended English abstract) (The Impact of Price Changes on the Supply and Demand of Properties: Theory, Empirical Evidence, and Implications) (publication) (discussion paper - with correct equations!)
"Die unsichtbare Umverteilung: Beeinflussung der Bodenpreise durch staatliche Taetigkeit," DISP, 1997, No. 129, 10-15. (The Invisible Redistribution: The Influence of Governmental Activities on Land Values.) (publication)
"Chancen und Probleme eines europaeischen Emissionszertifikatehandels im Flugverkehr," Jahrbuch der Schweizerischen Verkehrswirtschaft, 1996, Vol. 95/96, 43-54. (Opportunities and Problems of an Emission Trading System for Air Traffic in Europe.)
HANDBOOK CHAPTERS
(IN
GERMAN) "Preistheorie: Einfluss von Preisaenderungen auf Angebot und Nachfrage von Immobilien," In K.-W. Schulte (Editor), Immobilienoekonomie (4. Band: Volkswirtschaftliche Grundlagen), 2008. Munich: Oldenbourg. (Price Theory: Impact of Price Changes on Property Supply and Demand)
BOOKS (IN GERMAN)
"Standortattraktivitaet, Liegenschaftspreise und Mieten," WWZ
Forschungsbericht 4/99, 1999. (Attractiveness of Locations, Property Values,
and Rents. Research Report.
"Auswirkungen staatlicher Massnahmen auf die Bodenpreise: Eine theoretische und empirische Analyse der Kapitalisierung," Zuerich: Ruegger, 1998. (Effects of Governmental Measures on Land Values: A Theoretical and Empirical Analysis of Capitalization. Ph.D. Dissertation.) (order form) (publication - with link to content)
"Innovatives Management staatlicher Umweltpolitik: New Public Environmental Management," Basel: Birkhaeuser, with Stefan Schaltegger, Ruedi Kubat, and Stefan Vaterlaus, 1996. (Innovative Management of Environmental Policy: New Public Environmental Management.) "Tullock, Gordon (1994): The New Federalist," Kyklos, Vol. 50, No. 3, 445-446, 1997. GOVERNMENT REPORTS & REPORTS FOR OFFICIAL GOVERNMENT REVIEWS
"The Impact of
Restricting Housing Supply on House Prices and Affordability" Final
Report. Department for Communities and Local Government, November 2010.
(joint with Wouter Vermeulen)
(report) "The Cost of Regulatory Constraints on the British Office Market" prepared for the Barker Review of Land Use Planning, 15 May 2006. (joint with Paul Cheshire) (report) OTHER REPORTS "The Effects of Supply Constraints on Housing Costs: Empirical Evidence for England and Assessment of Policy Implications" Final Report for the National Housing and Planning Advice Unit (NHPAU), July 2010. (joint with Wouter Vermeulen)
"The Effects of Supply Constraints on Housing Costs: Empirical Evidence for England and Assessment of Policy Implications" Interim Report for the National Housing and Planning Advice Unit (NHPAU), September 2008. (joint with Wouter Vermeulen)
"Education Reforms and Household Mobility" Final Report for Columbia-LSE Alliance Collaborative Research Fund Seed Grant, January 2008. (joint with Christopher J. Mayer) ACCEPTED (FORTHCOMING) PAPERS
"The mortgage interest deduction and
its impact on homeownership decisions," with Tracy M. Turner, April
2013, London School of Economics, mimeo. (Review of Economics and Statistics,
forthcoming)
Abstract:
This
paper examines the impact of the combined U.S. state and federal mortgage
interest deduction (MID) on homeownership attainment, using data from 1984
to 2007 and exploiting variation in the subsidy arising from changes in the
MID within and across states over time. We test whether capitalization
of the MID into house prices offsets the positive effect on homeownership. We find that the MID only boosts homeownership attainment of higher income
households in less tightly regulated housing markets. In more
restrictive places an adverse effect exists. The MID is an ineffective
policy to promote homeownership and improve social welfare. PAPERS NOT YET PUBLISHED Revise and Resubmit-Stage
"Land Use Regulation and Productivity - Land Matters: Evidence from a UK supermarket chain," with Paul Cheshire and Ioannis Kaplanis, May 2012, London School of Economics, mimeo. (Revise and Resubmit) (discussion paper)
Abstract: We use unique store-specific data for a major UK supermarket chain to estimate the impact of planning, which restricts both the size and location of stores, on store output. Using the quasi-natural experiment of the variation in planning policies between England and other UK countries and a difference-in-difference approach, we isolate the impact of Town Centre First (TCF) policies. We find that space contributes directly to the productivity of stores and planning policies in England directly reduce output both by reducing store sizes and forcing stores onto less productive sites. Our results suggest that since the late 1980s planning policies have imposed a loss of total output of at least 18.3 to 24.9%. This is equivalent to more than a ‘lost decade’ of output growth in a major sector generated directly by government policy.
"The Impact of Supply Constraints on House Prices in England," with Wouter Vermeulen, September, September 2012, SERC Discussion Paper No. 119, September. (Revise and Resubmit) (discussion paper)
Abstract: We explore the causal effects of regulatory and physical supply constraints on house prices in England by exploiting a unique panel dataset of 353 local planning authorities ranging from 1974 to 2008. Using exogenous variation from a policy reform, local vote shares and historical density as instruments to identify the endogenous constraints-measures, we find that: i) Regulatory constraints have a very substantive positive long-run impact on house prices; ii) The effect of constraints due to scarcity of developable land is confined to highly urbanized areas; iii) Uneven topography has a quantitatively less meaningful impact; and iv) The effect of supply constraints on the price-earnings-elasticity is greater during boom than bust periods.
"The Economic Implications of House Price Capitalization: A Survey of an Emerging Literature," October, 2011, London School of Economics, SERC Discussion Paper No. 91. (Revise and Resubmit) (SERC discussion paper) (Lincoln Institute of Land Policy working paper)
Abstract: House price capitalization has long been thought to be a means of testing for efficiency in the local public sector. In this article I argue that the extent of house price capitalization itself may have important economic implications. In doing so I synthesize an emerging literature that explores the conditions under which public and private investments and intergovernmental transfers are capitalized into local house prices and the broader implications of such capitalization. The main insights are: (i) House price capitalization is more pronounced in locations with strict regulatory and/or geographical/physical supply constraints; (ii) capitalization can - under certain conditions - induce the provision of durable local public goods and club goods; and (iii) capitalization effects - which are habitually ignored by policy makers - have important adverse consequences for a wide range of policies such as intergovernmental aid or the mortgage interest deduction.
In the Research Pipeline (currently under revision or under review)
"Homeownership and Entrepreneurship," with Philippe Bracke and Olmo Silva, May 2012, London School of Economics, mimeo. (currently under revision) (discussion paper)
Abstract: We study the link between homeownership and entrepreneurship by exploiting the longitudinal dimension of the British Household Panel Survey (BHPS) and constructing a detailed monthly-spell dataset that tracks individuals’ job history and tenure choice, coupled with other time-varying characteristics. Our fixed-effect estimates show that purchasing a house reduces the likelihood of starting a business by 20-25%. This result is driven by homeowners with mortgages and persists for several years after entering homeownership. The negative link can be rationalized by portfolio considerations: leveraged housing investments crowd out entrepreneurial investments. Alternative explanations based on credit constraints find little support in our data.
"Stamp Duty and Household Mobility", May, 2012, London School of Economics, mimeo. (with Teemu Lyytikainen) (currently under revision) (discussion paper)
Abstract: We estimate the effect of the UK’s real estate transfer tax (‘stamp duty’) on household mobility using micro data. Exploiting a discontinuity in the tax schedule as a quasi-experimental setting, we isolate the impact of the stamp duty from other determinants of mobility. Our empirical strategy essentially compares similar households with self-assessed house values on either sides of a cut-off value where the tax rate increases from 1% to 3%. We find that a higher stamp duty negatively affects a household’s propensity to move and the expectation that a move is imminent. Our results suggest that a 2%-point increase in the stamp duty may reduce mobility by as much as 40 percent. "Local Economic Conditions and the Nature of New Housing Supply," with Jan Rouwendal and Wouter Vermeulen, London School of Economics, mimeo, November 2008. (currently under revision) (discussion paper)
Abstract: We explore the impact of local economic conditions on the type and size of newly constructed housing. A slightly modified standard open monocentric city model predicts that, as long as land use regulation is relatively lax, positive local income shocks cause construction of more multifamily housing and smaller units. Exploiting metro area-level American Housing Survey (AHS) data from 1984 to 2004, we confirm that (i) local economic shocks have the predicted effects, (ii) these effects are confined to metro areas with relatively lax land use regulation, and (iii) the adjustment process appears to be driven by migration (as is assumed in the open monocentric city model). Hence, severe land use controls may hamper metro area labor market adjustment not only through limits on the quantity of newly supplied units, but also by constraining their type to housing that is less suitable for migrants.
"The Determinants of Homeownership across Europe: Panel Data Evidence", June, 2008, London School of Economics, mimeo. (single authored) (currently under revision)
Abstract: This paper exploits the panel structure of the ECHP micro data and uses fixed effects-specifications to identify the main determinants of equilibrium housing tenure outcomes across Europe between 1994 and 2001. The accommodation type which affects both the relative supply of and demand for owner-occupied housing has the strongest impact. Holding occupant and location characteristics (including preferences for homeownership) constant, a flat in a small apartment building has a roughly 40 percentage points lower probability of being owner-occupied than a detached house. Among the occupants’ characteristics, only age has a quantitatively meaningful positive impact. At the regional level, the housing stock composition and the share of public rental housing are the main identifiable determinants of the vast homeownership rate differentials. Tax policy reforms have only had relatively minor effects on homeownership attainment and, counter to widespread perception; spatial differences in intergenerational cohesion do not explain homeownership rate differentials.
Older unpublished papers
"Homeownership and Land Use Control: A Dynamic Model with Voting and Lobbying," with Frederic Robert-Nicoud, January 2007, Research Papers in Environmental and Spatial Analysis, No 119. (discussion paper)
Abstract: Homeowners have incentives to control and limit local land development and anecdotic evidence suggests that 'homevoters' indeed actively support restrictive measures. Yet, US metro area level homeownership rates are strongly negatively related to corresponding measures of the restrictiveness of land use regulation. To shed light on these seemingly contradictory stylized facts, we present a dynamic model with a planning board that maximizes a weighted social welfare function (SWF). The SWF can be interpreted as the reduced form of various political economy models of voting and lobbying. We consider three special cases: a median voter model, a probabilistic voting model, and an 'influence for sale' model. In all three cases conditions exist that predict outcomes which are consistent with the presented stylized facts. Generally, our model predicts that the homeownership rate has an ambiguous effect on the regulatory restrictiveness.
"Housing Affordability and Land Prices: Is There a Crisis in American Cities?," with Edward Glaeser and Joseph Gyourko, December, 2001. (discussion paper)
See also my Personal Profile under LSE's 'Who is Who' Other useful web-links:
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