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Essays on Housing: tax treatment, prices, and macroeconomic implications
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
2020 (English)Doctoral thesis, monograph (Other academic)
Abstract [en]

Costly reversals of bad policies: the case of the mortgage interest deduction

This paper measures the welfare effects of removing the mortgage interest deduction under a variety of implementation scenarios. To this end, we build a life-cycle model with heterogeneous households calibrated to the U.S. economy, which features long-term mortgages and costly refinancing. In line with previous research we find that most households would prefer to be born into an economy without the deductibility. However, when we incorporate transitional dynamics less than forty percent of households are in favor of a reform and the average welfare effect is negative. This result holds under a number of removal designs.

Mortgage lending standards: implications for consumption dynamics

In this paper, we investigate to what extent stricter mortgage lending standards affect households' ability to smooth consumption. Using a heterogeneous-household model with incomplete markets, we find that a permanently lower loan-to-value (LTV) or payment-to-income (PTI) requirement only marginally affects the aggregate consumption response to a negative wealth shock. We show that even the distribution of marginal propensities to consume across households is remarkably insensitive to these permanent policies. In contrast, households’ consumption responses can be reduced if a temporary stricter LTV or PTI requirement is implemented prior to a negative wealth shock. However, strong assumptions need to be made for temporary policies to be welfare improving.

The great house price divergence:  a quantitative investigation of house price fundamentals

What explains the widening gap in house prices between U.S. metropolitan areas? In this paper, I build a two-region Rosen-Roback model with heterogeneous households, mortgage borrowing constraints, and housing markets to answer this question. I find that changes in regional productivity and the real interest rate explain 86% of the observed increase in dispersion of prices across metropolitan areas and 66% of the increase in the national house price index since 1995. Endogenous migration and location-varying land rents are key for these findings. When decomposing the results, both wages and the real rate contribute substantially to both the change in the level and dispersion of house prices. Turning to dynamics, prices are quick to adjust to changes in house price fundamentals, whereas migration is slow. This rapid change in prices leads to significant wealth and welfare gains among homeowners in expensive locations.

Place, publisher, year, edition, pages
Stockholm: Department of Economics, Stockholm University , 2020. , p. 217
Series
Monograph series / Institute for International Economic Studies, University of Stockholm, ISSN 0346-6892 ; 110
Keywords [en]
macroeconomics, housing, house prices, mortgage interest deduction, marginal propensity to consume, welfare, heterogeneous agents
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:su:diva-182467ISBN: 978-91-7911-202-8 (print)ISBN: 978-91-7911-203-5 (electronic)OAI: oai:DiVA.org:su-182467DiVA, id: diva2:1439391
Public defence
2020-09-11, Nordenskiöldsalen, Geovetenskapens hus, Svante Arrhenius väg 12, Stockholm, 09:00 (English)
Opponent
Supervisors
Available from: 2020-08-19 Created: 2020-06-12 Last updated: 2022-02-26Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
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  • Other locale
More languages
Output format
  • html
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  • asciidoc
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