Working Papers
Working Papers
Extreme Wildfires, Distant Air Pollution, and Household Financial Health with Xudong An and Stuart A. Gabriel
We link wildfire burn, smoke plume, air pollution, and consumer credit data to estimate the effects of wildfire-attributed pollution on consumer financial outcomes. Results indicate increased credit delinquency among households distant from the burn perimeter but exposed to high levels of pollution. Further analysis of confidential, supervisory data reveals elevated spending and indebtedness among treated households, which helps to corroborate and explain the delinquency findings. We also present evidence of health-related spending and income channels in explanation of the smoke and pollution effects. Findings indicate the adverse effects of wildfire could be salient to substantial dispersed population, including those distant from the fire zone.
Air Pollution and Rent Prices: Evidence from Wildfire Smoke Plums with Luis A. Lopez, Revise and resubmit at Real Estate Economics
We leverage quasi-experimental wildfire smoke shocks to analyze the causal effect of air pollution (PM2.5) on rent prices, using satellite-based smoke plumes data and ambient air pollution data. Our results indicate that the rent of homes that are not directly affected by wildfires but exposed to wildfire plumes declines by about -2.4% per one standard deviation increase in PM2.5. The response of home prices is more than three-fold highlighting a gap in the tolerance of poor air quality, which we find is driven by age-related differences between tenants and homeowners. We further show evidence that air pollution affects liquidity and search frictions in the rental market.
Financial Technology and the 1990s Housing Boom with Stephanie Johnson
The 1990s rollout of mortgage automated underwriting systems allowed for complex underwriting rules, cut processing time, and raised house prices substantially. We show that locations exposed to initial adopters of Freddie Mac’s Loan Prospector system experienced an early housing boom due to a switch to statistically-informed underwriting rules. Loan Prospector adoption increased lending at high loan-to-income ratios by around 18 per cent. Applying our estimated response to lenders who adopted later, we find that the rollout of new lending standards with the GSEs’ systems can explain more than half of U.S. house price growth between 1993 and 2002.
Up in Smoke: The Impact of Wildfire Pollution on Healthcare Municipal Finance with Luis A. Lopez, Dermot Murphy, and Sean Wilkoff
We show that smoke from in-state and out-of-state wildfires is associated with higher borrowing costs in the healthcare industry, amounting to $270 million in incremental costs from 2010–2019. In California, we find underinvestment in wildfire prevention and overinvestment in wildfire suppression, suggesting that policy is partially responsible for cross-state borrowing cost externalities. These costs are disproportionately higher in high-uninsurance and high-minority areas where there is more uncompensated care for smoke-related illnesses. Migration sorting exacerbates these costs by concentrating vulnerable households in high-smoke counties. Our findings underline the importance of interstate coordination to prevent and suppress wildfires, and how the associated costs could be shared between states.
The Impact of Labels on Real Asset Valuations with Yuliya Demyanyk and Luis A. Lopez
Expectations and sentiments of economic agents about financial prospects are both the drivers and the leading indicators of economic phenomena. This paper shows that neighborhood labels, frequently used in realtors’ property descriptions, have a causal impact on the demand for housing. Results indicate that the number of transactions, appraised values, house prices, and rents increased in minority neighborhoods upon removal of neighborhood labels. The underlying mechanism likely works through forming expectations about future growth in housing markets, as documented by the decrease in the rent-to-price ratio and the increase in the number of affluent households that moved into high-minority neighborhoods.
The Hidden Effects of Climate Risk: Rising Insurance Premiums Increase Mortgage Delinquency and Drive Relocation to Safer Areas with Shan Ge and Stephanie Johnson
As climate change intensifies natural disasters, homeowners' insurance premiums are rising dramatically. Using novel data on insurance policies for 5 million borrowers, we examine how premium increases affect mortgage performance, relocation decisions, and credit outcomes. We find that higher premiums increase both mortgage delinquency and prepayment probabilities. Results are robust using a novel instrumental variable. The prepayment effect is driven by relocation: larger premium increases trigger households to move to safer areas, reducing their subsequent insurance costs. The delinquency effect is concentrated among financially constrained borrowers and occurs across GSE and non-GSE mortgages. Higher premiums also increase credit card delinquency and deteriorate creditworthiness. Our findings reveal how climate change threatens household financial stability and potentially impacts financial system resilience through insurance costs, while showing how households mitigate effects through relocation to lower-risk areas.
Audit Partners and Loan Loss Provisioning: Evidence from U.S. Bank Holding Companies with Gauri Bhat, Hemang Desai, Christoffer Koch, and Erik J. Mayer
Using confidential data on audit partner identities, this study explores the impact of individual audit partners on loan loss provisioning in U.S. bank holding companies (BHCs) from 2006 to 2019. The banking industry provides a unique setting where the objectives of auditors and regulators concerning provisioning often diverge. Regulators favor prudence and are concerned with underestimation. Auditors evaluate the adequacy of provision but tend to prioritize verifiability under GAAP. Thus, the banking industry provides a natural laboratory for studying auditor judgment and the impact of individual audit partners on loan loss provisioning. Unlike prior studies that document the impact of audit partner style on various client-firm outcomes, we find only modest evidence of audit partner heterogeneity on loan loss provisions for public BHCs and those audited by large firms, but not when we limit the sample period to the post-financial crisis years. These findings highlight a nuanced story: while audit partner heterogeneity can affect provisioning, especially during periods of economic uncertainty, the heterogeneity appears to be constrained in more stable periods. We also find that loan loss allowances increase over the duration of the partner tenure, especially in public and small BHCs. For small BHCs, this pattern persists even after the crisis, implying that longer auditor relationships may lead to more conservative provisioning, potentially due to developing client-specific knowledge.
Gender Gaps in the Federal Reserve System, with Deepa Datta, Journal of Economic Behavior and Organization, 2025.
To better understand the stalled progress of women in economics, we construct new data on women’s representation and research output in one of the largest policy institutions—the Federal Reserve System. We document a slight increase in women’s representation over the past 20 years, in line with academic trends. We also document a significant gender gap in research output, including for years in which economists have greater domestic responsibilities, but nearly absent gender gaps in policy output and career progression. This work complements existing research on women in academia, allowing a more comprehensive examination of progress in the economics profession.
Adjusting to Macroprudential Policies: Loan-to-Value Limits and Housing Choice, Review of Financial Studies, 2023.
This study provides novel evidence regarding the effects of loan-to-value (LTV) limits on housing choices. Using a detailed loan-level dataset, I exploit the introduction of LTV limits in Israel. I find that the LTV limits led borrowers to choose housing units that were more affordable, farther from the central business district, and in lower socioeconomic neighborhoods. Additionally, these LTV limits increase interest rates and decrease loan amounts. The findings of this study indicate that macroprudential policies, which focus on the stability of the financial system, have micro implications on location choices, commuting costs, and movement to less-advantaged areas.
More than Shelter: The Effect of Rental Eviction Moratoria on Household Well-Being, with Xudong An and Stuart A. Gabriel, AEA Papers and Proceedings, 2022.
We investigate the impact of the 2020 COVID-19 rental eviction moratoria on household well-being. Analysis of new panel data indicates that eviction moratoria reduced evictions and resulted in redirection of scarce household financial resources to immediate consumption needs, notably including food and grocery spending. We also find that eviction moratoria reduced household food insecurity and mental stress, with larger effects evidenced among African American households. Findings suggest broad salutary effects of eviction moratoria during a period of widespread virus and economic distress.
The effect of LTV-based risk weights on house prices: Evidence from an Israeli macroprudential policy, with Steven Laufer, Journal of Urban Economics, 2021.
This paper studies the link between macroprudential regulation and house prices by asking whether policies that impose higher risk weights on high-LTV mortgages can slow house price growth. Studying a 2010 Israeli policy, we find that the prices on housing units likely to be purchased using mortgages subject to higher risk weights are reduced by about 2 1/2 percent. We find that the policy has larger effects in more expensive areas of the country and, in particular, in lower quality neighborhoods within these more expensive areas. Combining our results with estimates of the effect of this policy on mortgage interest rates, we derive an estimate for the semi-elasticity of house prices with respect to mortgage rates that is consistent with the upper range of estimates reported in the literature.
Structural Changes in Israeli Family Farms: Long-Run Trends in the Farm Size Distribution and the Role of Part-Time Farming, with Ayal Kimhi, Agriculture, 2021.
Israeli agriculture has experienced rapid structural changes in recent decades, including the massive exit of farmers, a resulting increase in average farm size, a higher farm specialization and a higher reliance on non-farm income sources. The higher farm heterogeneity makes it necessary to examine changes in the entire farm size distribution rather than the common practice of analyzing changes in the average farm size alone. This article proposes a nonparametric analysis in which the change in the distribution of farm sizes between two periods is decomposed into several components, and the contributions of subgroups of farms to this change are analyzed. Using data on Israeli family farms, we analyze the changes in the farm size distribution in two separate time periods that are characterized by very different economic environments, focusing on the different contributions of full-time farms and part-time farms to the overall distributional changes. We found that between 1971 and 1981, a period characterized by stability and prosperity, the farm size distribution has shifted to the right with relatively minor changes in higher moments of the distribution. On the other hand, between 1981 and 1995, a largely unfavorable period to Israeli farmers, the change in the distribution was much more complex. While the overall change in the size distribution of farms was smaller in magnitude than in the earlier period, higher moments of the distribution were not less important than the increase in the mean and led to higher dispersion of farm sizes.
Macroprudential Policy: Implementation, Effects, and Lessons, Israel Economic Review, 2019.
In this paper, I review the development of macroprudential policy (MPP) and, in particular, its regulatory structure, its influence on the financial system, and its costs and benefits. I find that the effectiveness of MPP depends on the institutional setup in which it is implemented: often, MPP is under the responsibility of the central bank, due to its independence, expertise and incentives to take action. However, this setup may generate conflicts between MPP and traditional monetary policy. I also discuss another issue undermining the effectiveness of MPP, namely, “leakages,” i.e., migrations of financial activity to institutions beyond the scope of application and enforcement of the MPP tool. Based on the Israeli experience of implementing MPP, I argue that coordination between the regulatory authorities supervising different sectors of the financial system is crucial for the successful implementation of MPP.