This is the first installment in what we hope will be a recurring series on new economic research.
Every Monday, the National Bureau of Economic Research, a nonprofit organization made up of some of North America’s most respected economists, releases its latest batch of working papers. The papers aren’t peer-reviewed, so their conclusions are preliminary (and occasionally flat-out wrong). But they offer an early peek into some of the research that will shape economic thinking in the years ahead. Here are three of this week’s most interesting papers:
Title: “Job Displacement and the Duration of Joblessness: The Role of Spatial Mismatch”
Authors: Fredrik Andersson, John C. Haltiwanger, Mark J. Kutzbach, Henry O. Pollakowski, Daniel H. Weinberg
What they found: Low-income workers are more likely to become long-term unemployed due to their physical isolation from potential jobs. Not only are jobs scarce in many poor neighborhoods, but low-income workers struggle to get to places where jobs do exist because of limited transit options.
Why it matters: Various public policies have tried to improve low-income workers’ access to jobs by improving transit, moving jobs closer to poor neighborhoods or moving low-income families closer to jobs. Those policies are based on research that suggests “spatial mismatch” is a significant factor in low-income unemployment, but that hypothesis is difficult to measure. The authors developed a new method to quantify the mismatch issue.
Key quote: “We find that better job accessibility significantly decreases the duration of joblessness among lower-paid displaced workers. This result is strongest for non-Hispanic blacks, females, and older workers.”
Title: “The Wealthy Hand-to-Mouth”
Authors: Greg Kaplan, Giovanni L. Violante, Justin Weidner
What they found: A surprising number of households have significant wealth in the form of houses or retirement accounts but are living paycheck to paycheck, meaning they have essentially no liquid assets. About a fifth of U.S. households fall into this category, which the authors label the “wealthy hand-to-mouth.”
Why it matters: Economists generally assume that when it comes to spending, poorer families are more responsive to changes in their income that wealthier ones. If their income falls, they spend less; if it rises, they spend more. But Kaplan et al’s findings suggest the wealthy hand-to-mouth behave more like low-income families than like other wealthy families because they spend everything they make each month. (The authors presented a version of this paper at the Brookings Panel on Economic Activity last month.)
Key quote: “The wealthy hand-to-mouth thus have consumption responses that, in many ways, are similar to the poor hand-to-mouth, yet have demographic characteristics and portfolio composition that resemble the non hand-to-mouth. This suggests that the three types of hand-to-mouth households each need their own unique place in frameworks that are to be used for analyzing and forecasting the eﬀects of ﬁscal policy.”
Title: “The Role of Proximity in Foreclosure Externalities: Evidence from Condominiums”
Authors: Lynn M. Fisher, Lauren Lambie-Hanson, Paul S. Willen
What they found: Condominium foreclosures hurt the value of other properties at the same address but not properties elsewhere in the same condo association.
Why it matters: Economists have long known that foreclosures tend to lower the value of nearby properties. But it isn’t clear why that is. It might be simply because they add more supply to the market, driving down prices. But it also might be because foreclosed properties tend to fall into disrepair, making nearby homes less attractive. Fisher et al study condominiums in Boston and find that foreclosures only affect the sale price of properties at the same address. That suggests foreclosures affect prices by directly hurting the value of adjacent properties, not just by adding more supply.
Key quote: “Our analysis of condominium foreclosures in Boston shows that the discounts generated by nearby foreclosures are a physical externality, which can clearly justify active policies aimed at preventing or mitigating foreclosures.”