System Working Papers

Dionissi Aliprantis and Hal Martin

Landlords in high-opportunity neighborhoods screen out tenants using vouchers. In our correspondence experiment, signaling voucher status cuts landlord responses in half. This voucher penalty increases with posted rent and varies little with signals of tenant quality and race. Our results suggest a successful, systematic policy of moving to opportunity would require more direct engagement with landlords.

Topics: Housing; Public policy; Economic opportunity

Bo Zhao

This paper shows how to design a state education aid formula that can effectively address funding inequity and inadequacy while taking political feasibility into account. It first develops a measure of the gap between education cost and revenue capacity, both of which are estimated using school district characteristics that are outside the direct control of local officials at any given point in time. The paper then proposes, as a potential solution, a gap-based formula that allocates state aid to close the cost-capacity gaps.

Topics: K-12 education; Inequality; Public policy

Enrique G. Mendoza, Eugenio Rojas, Linda L. Tesar, and Jing Zhang

Empirical evidence shows that lockdowns and health care saturation help explain the cross-country variation in GDP declines even after controlling for COVID-19 cases and mortality. We explain this output-pandemia tradeoff as resulting from a shock to subsistence health demand that is larger at higher capital utilization in a model with entrepreneurs and workers. Quantitatively, strict lockdowns and large transfer hikes can be optimal and yield sizable welfare gains because they prevent a sharp rise in inequality.

Topics: COVID-19; Public health; Macroeconomics

Katharine Bradbury

This study uses information from metropolitan areas and from school districts to understand which factors are strongly related to the size of racial and socioeconomic test-score gaps. One key factor is the degree to which state aid to school districts is distributed progressively to districts with high fractions of students living in poverty. Second, test-score gaps are larger in areas where poverty segregation is greater, that is, where, compared with white children or higher-income children, minority children or low-income children are in school districts with more students from low-income families.

Topics: K-12 education; Inequality; Public policy

Ying Shi, Daniel Hartley, Bhashkar Mazumder, and Aastha Rajan

The Great Migration significantly increased the number of African Americans moving to northern and western cities beginning in the first half of the 20th century. We show that their arrival shaped slum clearance and urban redevelopment efforts in receiving cities. We find that local governments responded by undertaking more urban renewal projects that aimed to redevelop and rehabilitate “blighted” areas.

Topics: Urban economics; Community & economic development; Housing

Marco Giacoletti, Rawley Z. Heimer, and Edison G. Yu

We develop empirical tests for discrimination that use high-frequency evaluations to address the problem of unobserved heterogeneity in a conventional benchmarking test. We bring our approach to the residential mortgage market. Owing to within-month variation in loan officers’ subjectivity, we estimate that Black mortgage applicants have 3.5 percent to 5 percent lower approval rates. When we use this approach to evaluate policies, we find that shadow banking has reduced discrimination, presumably by having a larger presence in under-served communities.

Topics: Borrowing & lending; Inequality; Payments & FinTech

Brent W. Ambrose, Xudong An, and Luis A. Lopez

We show, using a stylized model, how the financing choice of landlords can impact eviction decisions in rental markets. Since multifamily loans rely on timely cash flows from tenants, strict underwriting factors can increase the chances that landlords are able to weather income shocks. Lender-provided relief may create further leeway for landlords to work out a deal with tenants who default on rental payments. We also quantify the eviction risks induced by the COVID-19 pandemic for 12 U.S. cities using our empirical model.

Topics: Borrowing & lending; Housing; COVID-19

Xudong An, Larry Cordell, Liang Geng, and Keyoung Lee

Using a novel database that combines mortgage servicing records, credit-bureau data, and loan application information, we show that lower-income and minority borrowers have significantly higher nonpayment rates during the COVID-19 pandemic, even after controlling for conventional risk factors. We then find that government and private-sector forbearance programs have mitigated these inequalities in the near term, as lower-income and minority borrowers have taken up the short-term debt relief at higher rates.

Topics: Borrowing & lending; Inequality; Low & moderate income; COVID-19

Roozbeh Hosseini, Karen Kopecky, and Kai Zhao

Using a dynamic panel approach, we provide empirical evidence that negative health shocks reduce earnings. The effect is primarily driven by the participation margin and is concentrated in less-educated individuals and those with poor health. We build a dynamic, general equilibrium, life cycle model that is consistent with these findings.

Topics: Wages, income, and wealth; Insurance; Public policy

David Hao Zhang and Paul Willen

This paper uses a new methodology to assess mortgage pricing discrimination faced by minority borrowers. We identify a “menu problem” that comes from the multidimensional nature of mortgage pricing. Empirically, we find that mortgage pricing differentials by race still exist, particularly among more creditworthy conforming borrowers.

Topics: Borrowing & lending; Housing; Inequality

Lauren Sartain and Lisa Barrow

In 2017, Chicago Public Schools adopted an online universal application system for all high schools with the hope of providing more equitable access to high-performance schools. Despite the new system, Black students and students living in low-socioeconomic-status neighborhoods remained less likely than their peers to enroll in a high-performance high school. We characterize constraints that students and families may face in enrolling in a high-performance high school, including eligibility based on prior academic achievement, distance from high-performance options, and neighborhood and elementary school resources.

Topics: K-12 education; Public policy; Diversity & inclusion

Daniel Aaronson, Jacob Faber, Daniel Hartley, Bhashkar Mazumder, and Patrick Sharkey

We estimate the long-run effects of the 1930s Home Owners Loan Corporation (HOLC) redlining maps on census tract–level measures of socioeconomic status and economic opportunity from the Opportunity Atlas (Chetty et al. 2018). We find that the maps had large and statistically significant causal effects on a wide variety of outcomes measured at the census tract level for cohorts born in the late 1970s and early 1980s.

Topics: Housing; Inequality; Economic opportunity

Dionissi Aliprantis and Hal Martin

The Opportunity Atlas (OA) is an innovative data set that ranks neighborhoods according to children’s adult outcomes in several domains, including income. This paper shows that neighborhood sorting contributes to OA estimates. We document cases in which small sample sizes and changes over time can explain disagreements between OA rankings and those based on contemporaneous variables.

Topics: Economic opportunity; Public policy

Fumiko Hayashi, Marie-Hélène Felt, Joanna Stavins, and Angelika Welte

Using data from the United States and Canada, we quantify consumers’ net pecuniary cost of using cash, credit cards, and debit cards for purchases across income cohorts. We find that consumers in the lowest-income cohort pay the highest net pecuniary cost as a percentage of transaction value, while consumers in the highest-income cohort pay the lowest net cost.

Topics: Consumer economics; Wages, income, and wealth; Inequality

Marianna Kudlyak, Murat Tasci, and Didem Tuzemen

This paper estimates the impact of minimum wage increases on the quantity of labor demanded as measured by firms’ vacancy postings. We find that minimum wage increases during the 2005–18 period led to substantial declines in vacancy postings in occupations with a larger share of employment around the prevailing minimum wage. Our estimate implies that a 10 percent increase in the binding minimum wage level reduces vacancies by 2.4 percent in this group.

Topics: Minimum wage; Unemployment

Brooke Helppie-McFall and Joanne W. Hsu

Using data from the Survey of Consumer Finances, we describe the financial profiles of U.S. families whose workers were most vulnerable to coronavirus-related earnings losses in the spring of 2020, based on whether a particular worker was deemed "essential" and whether a worker's job could be conducted remotely. We find that families with workers not able to work remotely who were most vulnerable to layoff also had both demographic and financial profiles that are associated with greater vulnerability to income shocks: These families were more likely to be people of color and single wage earners and to have less savings.

Topics: COVID-19; Unemployment; Wages, income, and wealth

Dionissi Aliprantis, Hal Martin, and Kristen Tauber

There is currently interest in crafting public housing policy that combats, rather than contributes to, the residential segregation in American cities. One such policy is the Housing Mobility Program (HMP), which aims to help people move from disinvested neighborhoods to areas with more opportunities. This paper studies how design features influence the success of HMPs in reducing racial segregation.

Topics: Housing; Public policy; Diversity & inclusion

James Bailey, Nathan Blascak, and Slava Mikhed

In July 2005, a set of cuts to Medicaid eligibility and coverage went into effect in the state of Missouri. We show that the Medicaid reform led to increases in both credit card borrowing and debt in third-party collections. Our results suggest that there are important asymmetries in the financial effects of shrinking a public health insurance program compared with a public health insurance expansion.

Topics: Public health; Public policy; Insurance

Maria Marta Ferreyra, Carlos Garriga, Juan David Martin, and Angelica Maria Sanchez Diaz

To evaluate the potential effects of free college policies, we develop and estimate a dynamic model of college enrollment, performance, and graduation. Universal free college expands enrollment the most, but it does not affect graduation rates and has the highest per-graduate cost. Performance-based free college, in contrast, delivers a slightly lower enrollment expansion, yet a greater graduation rate at a lower per-graduate cost. Additional, complementary policies might be required to elicit the large effort increase needed to raise graduation rates.

Topics: Higher education; Public policy

Sitian Liu and Yichen Su

Prior studies have shown that women are more willing to trade off wages for short commutes than men. Our model shows that differential commuting choices account for about 16-21 percent of the gender wage gap on average, but the contribution varies widely across residential locations. The model also shows that policies that increase commute speed or density in the central city neighborhoods could moderately lower the gender wage gap.

Topics: Wages, income, and wealth; Inequality

John Coglianese and Brendan M. Price

Joblessness is highly seasonal. We show that an excess share of prime-age U.S. workers experience recurrent separations spaced exactly 12 months apart. We find that these workers incur large earnings losses during the off-season. Lost earnings are (1) driven mainly by repeated separations from the same employer; (2) not recouped at other firms; (3) partly offset by unemployment benefits; and (4) amplified by concurrent drops in partners' earnings.

Topics: Employment & labor markets; Unemployment; Insurance

Leland D. Crane, Ryan A. Decker, Aaron Flaaen, Adrian Hamins-Puertolas, and Christopher Kurz

We review official data on business exit in recent decades. Business exit is common in the U.S. and is countercyclical. We explore a range of alternative measures and indicators of business exit, including novel measures based on payroll events and phone-tracking data, and find tentative evidence that exit has been elevated during 2020. Evidence is somewhat mixed, however, and exiting businesses do not appear to represent a large share of U.S. employment.

Topics: Small business; COVID-19; Recessions

Kristopher Gerardi, Paul Willen, and David Hao Zhang

Black and Hispanic White borrowers pay more than 50 basis points higher interest rates than White borrowers in a large, representative sample of loans insured by Fannie Mae and Freddie Mac. The authors show that this disparity is primarily driven by the fact that White borrowers are more likely to exploit periods of falling interest rates by refinancing their mortgages or moving.

Topics: Inequality; Monetary policy; Borrowing & lending

Diego Comin, Ana Danieli, and Martí Mestieri

We propose a mechanism for labor-market polarization based on the nonhomotheticity of demand that we call the income-driven channel. Our mechanism builds on a novel empirical fact: Expenditure elasticities and production intensities in low- and high-skill occupations are positively correlated across sectors. Thus, as income grows, demand shifts toward expenditure-elastic sectors, and the relative demand for low- and high-skill occupations increases, causing labor-market polarization.

Topics: Employment & labor markets; Wages, income, and wealth; Low & moderate income

Alexander Ludwig, Alexander Monge-Naranjo, Ctirad Slavik, and Faisal Sohail

We estimate the effects that various financial deregulations in the U.S. have had on the country's income distribution. We find that the various reforms have moved inequality in drastically different directions.

Topics: Inequality; Low & moderate income; Financial regulation

Nicolas Petrosky-Nadeau

Job acceptance decisions weigh the value of a job against remaining unemployed. A reservation level of benefit payments exists in this dynamic decision problem at which an individual is indifferent between accepting and refusing an offer. Estimating the reservation benefit for a wide range of U.S. workers suggests that few would turn down an offer to return to work at the previous wage under the CARES Act expanded unemployment insurance payments.

Topics: Insurance; Unemployment; COVID-19

Lindsay Jacobs, Elizabeth Llanes, Kevin Moore, Jeffrey Thompson, and Alice Henriques Volz

Hannah Rubinton

Michele Battisti, Ryan Michaels, and Choonsung Park

J. Ignacio García-Pérez and Sílvio Rendon

François Gourio and Charles Fries

Pia Orrenius, Madeline Zavodny, and Stephanie Gullo

Brett Barkley and Mark E. Schweitzer

Robert E. Hall and Marianna Kudlyak

Rajashri Chakrabarti, Vyacheslav Fos, Andres Liberman, and Constantine Yannelis

Didem Tüzemen

Daniel Cooper, Karen Dynan, and Hannah Rhodenhiser

Sanghoon Lee, Seung Hoon Lee, and Jeffrey Lin

Bo Zhao

Rajashri Chakrabarti and Maxim Pinkovskiy

Katharine Bradbury

Eric Nielsen

Davide Melcangi

Matthew Jaremski and David C. Wheelock

Andrew M. Dumont

Didem Tüzemen and Willem Van Zandweghe

Donna Feir, Rob Gillezeau, and Maggie E.C. Jones

Samuel Antill and Asani Sarkar

Diego Daruich

Enrique Martínez-García and Valerie Grossman

Kimberly Bayard, Emin Dinlersoz, Timothy Dunne, John Haltiwanger, Javier Miranda, and John J. Stevens

Andreas Fuster, Greg Kaplan, and Basit Zafar

Jonathan Fisher, David Johnson, Timothy Smeeding, and Jeffrey Thompson

Jeffrey Thompson, Michael Parisi, and Jesse Bricker

Jack DeWaard, Janna E. Johnson, and Stephan D. Whitaker

Bill Dupor, Marios Karabarbounis, Marianna Kudlyak, and M. Saif Mehkari

Daniel Aaronson, Jonathan Davis, and Karl Schulze

Michael Sposi

Bruce Fallick and Pawel Krolikowski

Tomaz Cajner, Tyler Radler, David Ratner, and Ivan Vidangos

Ina Ganguli, Jeffrey Lin, and Nicholas Reynolds

Sarena F. Goodman, Alice Henriques Volz, and Alvaro Mezza

Brandyn Bok, Daniele Caratelli, Domenico Giannone, Argia Sbordone, and Andrea Tambalotti

Leonard Nakamura, Jon Samuels, and Rachel Soloveichik

M.M. Croce, A.G. Karantounias, S. Raymond, and L. Schmid

Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow, and Huiyu Li

Kartik Athreya, José Mustre-del-Río, and Juan M. Sánchez

Patrick Coate, Pawel Krolikowski, and Mike Zabek

Marco Bassetto and Wei Cui

Chi-Young Choi and Alexander Chudik

Keith Barnatchez, Leland D. Crane, and Ryan A. Decker

Arthur Acolin, Paul Calem, Julapa Jagtiani, and Susan Wachter

Amanda Bayer and David W. Wilcox

Daniel Aaronson, Rajeev Dehejia, Andrew Jordan, Cristian Pop-Eleches, Cyrus Samii, and Karl Schulze

Daniel Cooper, María José Luengo-Prado, and Jonathan A. Parker

Lei Ding and Leonard Nakamura

Randall Akee, Elton Mykerezi, and Richard M. Todd

R. Anton Braun, Karen A. Kopecky, and Tatyana Koreshkova

Jonathan Davis and Bhashkar Mazumder

Kelly D. Edmiston

Randal J. Verbrugge and Joshua Gallin

Anat Bracha and Mary A. Burke

Kristle Cortés, Andrew Glover, and Murat Tasci

Pedro Amaral

Dionissi Aliprantis

Andrew Hanson, Zackary Hawley, and Hal Martin

Pia Orrenius

William R. Emmons and Lowell R. Ricketts

Roberto Pinheiro and Murat Tasci

Daniel Aaronson and Brian J. Phelan

Economic Research Department

Jenny Schuetz, Arturo Gonzalez, Jeff Larrimore, Ellen A. Merry, and Barbara J. Robles

Sarena F. Goodman and Adam M. Isen

Katharine Bradbury

Jonathan Heathcote and Hitoshi Tsujiyama

Olivier Coibion, Yuriy Gorodnichenko, Marianna Kudlyak, and John Mondragon

Daniel Cooper and María José Luengo-Prado

Lisa Barrow, Lauren Sartain, and Marisa de la Torre

Steven Laufer and Andrew Paciorek