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Publication The Jumbled Alphabet Soup of the Collapsed Home Mortgage Market: ABCP, CDO, CDS and RMBS(2010-01-01) Phillips, Georgette CIt all started so simply. Consumers needed access to loans to purchase a home and weave themselves into the American Dream. Lenders were constrained when capital was tied up in long term mortgages. The Government saw the opportunity to alleviate both problems by buying and bundling the home mortgages and using them as collateral (along with an implicit guarantee) for publicly traded investments on the secondary market. But, it became so complex. The market whirled out of control as investments and derivatives became more and more distant from the ultimate source of repayment-the underlying mortgages. The policy of imposing the government into capital markets has a profound effect because it not only prompts consumer behavior, but also, controls access to capital in the housing finance arena. Add lax regulation, mismatched incentives and outright greed into the brew and the result is total market failure as we have recently endured.Publication Estimating the Distortionary Effects of Ethnic Quotas in Singapore Using Housing Transactions(2014-07-01) Wong, MaisyDesegregation is a key policy issue in many countries. I investigate a residential desegregation program in Singapore — the ethnic housing quotas. I show that choice restrictions imposed on apartment blocks above the quota limits (constrained) could have distortionary effects, causing price and quantity differences for constrained versus unconstrained blocks. I test these predictions by hand-matching more than 500,000 names in the phonebook to ethnicities, to calculate ethnic proportions at the apartment block level. I can then investigate differences for constrained and unconstrained blocks close to the quota limits and test for sorting around the limits. I find that price differences are between 3% and 5%. Quantity effects are economically significant, translating to longer time-on-market durations. Selection cannot fully explain these results. My results point to challenges in achieving desegregation using quantity restrictions.Publication Underpriced Default Spread Exacerbates Market Crashes(2006-10-09) Koh, Winston T.H; Pavlov, Andrey; Mariano, Roberto S; Phang, Sock Y; Wachter, Susan M; Tan, Augustine H.HIn this paper, we develop a specific observable symptom of a banking system that underprices the default spread in non-recourse asset-backed lending. Using three different data sets for 18 countries and property types, we find that, following a negative demand shock, the “underpricing” economies experience far deeper asset market crashes than economies in which the put option is correctly priced. Furthermore, only one of the countries in our sample continues to exhibit the underpricing symptom following a market crash. This indicates that market crashes have a cleansing effect and eliminate underpricing at least for a period of time. This makes investing in such markets safer following a negative demand shock.Publication Dequity: The Blurring of Debt and Equity in Securitized Real Estate Financing(2005-01-01) Poindexter, Georgette CThis paper explores the legal differentiation of equity and debt in subordinate real estate financing. Various financing vehicles that occupy a gray space between true debt and true equity have replaced traditional asset secured debt lending. This paper investigates the legal rights and responsibilities of parties functioning in the gray area. The goal of this examination is to identify potential conflicts and unforeseen consequences of investments possessing attributes of both equity and debt in the event of default.Publication Skill Transferability, Migration, and Development: Evidence From Population Resettlement in Indonesia(2016-09-01) Bazzi, Samuel; Gaduh, Arya; Rothenberg, Alexander D; Wong, MaisyWe use a natural experiment in Indonesia to provide causal evidence on the role of location-specific human capital and skill transferability in shaping the spatial distribution of productivity. From 1979–1988, the Transmigration Program relocated two million migrants from rural Java and Bali to new rural settlements in the Outer Islands. Villages assigned migrants from regions with more similar agroclimatic endowments exhibit higher rice productivity and nighttime light intensity one to two decades later. We find some evidence of migrants’ adaptation to agroclimatic change. Overall, our results suggest that regional productivity differences may overstate the potential gains from migration. (JEL J24, J43, J61, O13, O15, Q13, R23)Publication An Urban Slice of Apple Pie: Rethinking Homeownership in U.S. Cities(2012-01-01) Phillips, Georgette CThe romantic notion of homeownership is deeply rooted in the American psyche. Homeownership as the "American Dream" borders on cliche. We proclaim that June is "National Home Ownership Month." However, it is worth asking whether this aspiration to own a home can or should be spatially differentiated. Beginning with the first Home Owners' Loan Corporation (HOLC) maps that infamously redlined inner-city neighborhoods, the push toward homeownership favored suburban locations. As GIs returned from World War II, suburban Levittown-type developments beckoned with the promise of a safe and tranquil escape from the tensions of the city. Homeownership rates in the suburbs typically far outstripped homeownership rates in the metropolitan cities of the United States. Other government policies built upon this suburban favoritism leaving city dwellers to wonder if they were, in fact, permitted to share in the same dream.Publication Spatial Variation in the Risk of Home Owning(2009-05-01) Sinai, ToddTo casual observers, home owning often appears risky. They note that the typical preretirement household (in the 2004 Survey of Consumer Finances) has about 45 percent of its net worth tied up in housing wealth - and those house values can be volatile. In fact, between the end of 2005 and the end of 2007, real house prices fell by more than 15 percent, according to the 10-city composite S&P/Case-Shiller Home Price Index. Even expert analysts of housing markets typically concern themselves with the risk of house price declines. Indeed, chapters 2 and 3 in this volume address ways to mitigate the asset price risk of housing through the use of house price derivatives or home equity insurance.Publication Borrowing Constraints and Homeownership(2016-05-01) Acolin, Arthur; Bricker, Jesse; Calem, Paul S; Wachter, Susan MThis paper identifies the impact of borrowing constraints on homeownership in the U.S. in the aftermath of the 2008 financial crisis. While homeownership declines and tightened credit are evident, the role the tightening of credit has had on the probability of individual households to become homeowners has not been previously identified. The homeownership rate in 2010-2013 is estimated to be 2.3 percentage points lower than if the constraints were set at the 2001 level.Publication Network Effects, Congestion Externalities, and Air Traffic Delays: Or Why Not All Delays Are Evil(2003-09-01) Mayer, Christopher; Sinai, ToddWe examine two factors that explain air traffic congestion: network benefits due to hubbing and congestion externalities. While both factors impact congestion, we find that the hubbing effect dominates empirically. Hub carriers incur most of the additional travel time from hubbing, primarily because they cluster their flights in short time spans to provide passengers as many potential connections as possible with a minimum of waiting time. Non-hub flights at the same hub airports operate with minimal additional travel time. These results suggest that an optimal congestion tax might have a relatively small impact on flight patterns at hub airports.Publication Immigration and the Neighborhood(2011-05-01) Saiz, Albert; Wachter, Susan MWithin metropolitan areas, neighborhoods of growing immigrant settlement are becoming relatively less desirable to natives. We deploy a geographic diffusion model to instrument for the growth of immigrant density in a neighborhood. Our approach deals explicitly with potential unobservable shocks that may be correlated with proximity to immigrant enclaves. The evidence is consistent with a causal interpretation of an impact from growing immigrant density to native flight and relatively slower housing value appreciation. Further evidence indicates that these results are driven more by the demand for residential segregation based on ethnicity and education than by foreignness per se.