Wharton’s Real Estate Department seeks to produce sophisticated professionals with the necessary skills to succeed in the business world but who also have a broader perspective on the issues involved in creating and maintaining living and working environments. Relevant issues that department faculty examine include finance, investments, production, operations, development law, design, environmental remediation, public policy, economic market analysis, and architecture.
PublicationBanking for the Poor: Evidence From India(2005-04-01) Burgess, Robin; Pande, Rohini; Wong, GraceState-led credit and savings programs have been implemented in numerous low income countries, but their success in reaching the poor remains widely debated. We report on research that exploits the policy features of the Indian social banking program to provide evidence on this issue. State-led branch expansion into rural unbanked locations reduced poverty across Indian states. In addition, the enforcement of directed bank lending requirements was associated with increased bank borrowing among the poor, in particular low caste and tribal groups. (JEL: O38, G28) PublicationThe Inevitability of Marketwide Underpricing of Mortgage Default Risk(2006-01-01) Pavlov, Andrey; Wachter, Susan MLenders are frequently accused of mispricing the put option embedded in nonrecourse lending. Prior research shows one lender's incentives to underprice. Here, we identify the conditions for a marketwide underpricing equilibrium. We demonstrate that, in a market with many players, given sufficient time, a race to the bottom and marketwide mispricing are inevitable. Underpricing occurs because bank managers and shareholders exploit mispriced deposit insurance. We show that the probability of the underpricing equilibrium increases with time since the previous market crash and that the more volatile the underlying asset market, the more likely it is subject to underpricing. PublicationRising Trade Costs? Agglomeration and Trade With Endogenous Transaction Costs(2008-02-01) Duranton, Gilles; Storper, MichaelWhile transport costs have fallen, the empirical evidence also points at rising total trade costs. In a model of industry location with endogenous transaction costs that seeks to replicate features from the machinery industry, we show how and under which conditions a decline in transport costs can lead to an increase in the total cost of trade. The subtle relationship between (endogenous) transport costs and the sensitivity of trade to distance is also explored. Alors que les coûts de transport ont chuté, les résultats empiriques montrent que les coûts totaux de transaction sont en hausse. A l'aide d'un modèle de localisation industrielle avec coûts de transaction endogènes qui tente d'approximer les caractéristiques de l'industrie de la machinerie, on montre comment et dans quelles conditions une chute des coûts de transport peut entraîner un accroissement des les coûts totaux de transaction. On explore aussi la relation subtile entre les coûts de transport (endogènes) et la sensibilité des flux de commerce au facteur distance. PublicationFamily Types and the Persistence of Regional Disparities in Europe(2009-01-01) Duranton, Gilles; Rodríguez-Pose, Andrés; Sandall, RichardThis article examines the association between one of the most basic institutional forms, the family, and a series of demographic, educational, social, and economic indicators across regions in Europe. Using Emmanuel Todd's classification of medieval European family systems, we identify potential links between family types and regional disparities in household size, educational attainment, social capital, labor participation, sectoral structure, wealth, and inequality. The results indicate that medieval family structures seem to have influenced European regional disparities in virtually every indicator that we considered. That these links remain, despite the influence of the modern state and population migration, suggests that such structures are either extremely resilient or in the past were internalized within other social and economic institutions as they developed. PublicationPop Internationalism: Has Half a Century of World Music Trade Displaced Local Culture?(2013-06-01) Ferreira, Fernando V; Waldfogel, JoelAdvances in communication technologies have increased the availability of cultural goods across borders, raising concerns that cultural products from large economies will displace those in smaller economies. This article provides stylised facts about global music consumption and trade since 1960 using a unique data on popular music charts corresponding to over 98% of the global music market. Contrary to growing fears about large-country dominance, our gravity estimates show a substantial bias towards domestic music that has, perhaps surprisingly, increased in the past decade. Moreover, we find no evidence that new communications channels reduce the consumption of domestic music. PublicationDoes Home Owning Smooth the Variability of Future Housing Consumption?(2012-03-01) Paciorek, Andrew; Sinai, ToddWe show that the hedging benefit of owning a home reduces the variability of housing consumption after a move. When a current home owner’s house price covaries positively with housing costs in a future city, changes in the future cost of housing are offset by commensurate changes in wealth before the move. Using Census micro-data, we find that the cross-sectional variation in house values subsequent to a move is lower for home owners who moved between more highly covarying cities. Our preferred estimates imply that an increase in covariance of one standard deviation reduces the variance of subsequent housing consumption by about 11%. Households at the top end of the covariance distribution who are likely to have owned large homes before moving get the largest reductions, of up to 40% relative to households at the median. PublicationExploring the Detailed Location Patterns of UK Manufacturing Industries Using Microgeographic Data(2008-02-01) Duranton, Gilles; Overman, Henry GWe use a point-pattern methodology to explore the detailed location patterns of U.K. manufacturing industries. In particular, we consider the location of entrants and exiters versus continuing establishments, domestic- versus foreign-owned, large versus small, and affiliated versus independent. We also examine colocalization between vertically-linked industries. Our analysis provides a set of new stylized facts and confirmation for others. PublicationMacroeconomic Risk Factors and the Role of Mispriced Credit in the Returns From International Real Estate Securities(2015-01-01) Pavlov, Andrey; Steiner, Eva; Wachter, Susan MWe examine the canonical influence of global market, currency and inflation risks on the returns from international real estate securities. In addition, we study how mispricing of credit in the local banking systems is related to the returns from these securities. We analyze a global sample of real estate securities over the period 1999 to 2011 to test our hypotheses. We find support for the anticipated relationships between macroeconomic risk factors and the returns from international real estate securities. Our evidence also supports the expected link between local credit market conditions and the performance of international real estate securities. PublicationDoes Gender Matter for Political Leadership? The Case of U.S. Mayors(2014-04-01) Ferreira, Fernando V; Gyourko, JosephWhat are the consequences of electing a female leader for policy and political outcomes? We answer this question in the context of U.S. cities, where women's participation in mayoral elections increased from negligible numbers in 1970 to about one-third of the elections in the 2000's. A novel data set of U.S. mayoral elections from 1950 to 2005 was used, and a regression discontinuity design was employed to deal with the endogeneity of female candidacy to city characteristics. In contrast to most research on the influence of female leadership, we find no effect of gender of the mayor on policy outcomes related to the size of local government, the composition of municipal spending and employment, or crime rates. These results hold both in the short and the long run. While female mayors do not implement different policies, they do appear to have higher unobserved political skills, as they have at least a 5 percentage point higher incumbent effect than a comparable male. But we find no evidence of political spillovers: exogenously electing a female mayor does not change the long run political success of other female mayoral candidates in the same city or of female candidates in local congressional elections. PublicationUnderpriced 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.