Job Market Paper
The Distributional Impact of Mortgage Interest Subsidies: Evidence from Variation in State Tax Policies. [pdf]
Abstract:
Mortgage interest tax deductions are a widespread, expensive, and regressive tax expenditure, so understanding the distribution of the policy’s costs and benefits is a question of first-order economic importance. This paper combines a sufficient-statistics approach with direct estimates of the induced effect on house prices to measure the policy’s economic incidence, as distinct from its statutory incidence. I start with a flexible economic framework that expresses the policy’s distributional impact in terms of a key parameter: the capitalization effect, or the extent to which the deduction increases house prices. I then directly estimate this parameter, drawing on a national database of housing transactions and exploiting sharp variation in tax rates and itemization rules at state borders. Comparing the sale prices of observationally identical homes purchased on either side of a border, I find that a one percentage point increase in the tax rate applied to mortgage interest increases house prices by 0.8%, which is sufficient to erase the tax savings for a first-time borrower when their loan-to-value ratio is under 60%. Finally, I combine the empirical result and the derived incidence expressions to show the distribution of the policy’s impacts among new home-buyers. Accounting for non-itemization rates indicates that average buyers at most incomes do not benefit from the MID, though there is some heterogeneity across income levels and housing markets.
Working Papers
Housing Disease and Public School Finances (with Fernando Ferreira). [NBER, pdf]
Abstract: Median expenditure per student in U.S. public schools grew 41% in real terms from 1990 to 2009. We propose a new mechanism to explain part of this increase: housing disease, a fiscal externality from local housing markets in which unexpected booms generate extra revenues that schools administrators have incentives to spend, independent of local preferences for provision of public goods. We establish the importance of housing disease by: (i) assembling a novel microdata set containing the universe of housing transactions for a large sample of school districts; and (ii) using the timelines of school district housing booms to disentangle the effects of housing disease from reverse causality and changes in household composition. We estimate housing price elasticities of per-pupil expenditures of 0.16-0.20, which accounts for approximately half of the rise in public school spending. School districts did not boost administrative costs with those additional funds. Instead, they primarily increased spending on instruction and capital projects, suggesting that the cost increase was accompanied by improvements in the quality of school inputs.
Publications
“No Excuses” Charter Schools and College Enrollment: New Evidence From a High-School Network in Chicago (with Blake Heller). Forthcoming, Education Finance and Policy. [SSRN, pdf, Education Next version].
Abstract: While it is well-known that certain charter schools dramatically increase students’ standardized test scores, there is considerably less evidence that these human capital gains persist into adulthood. To address this matter, we match three years of lottery data from a high-performing charter high school to administrative college enrollment records and estimate the effect of winning an admissions lottery on college matriculation, quality, and persistence. Seven to nine years after the lottery, we find that lottery winners are 10.0 percentage points more likely to attend college and 9.5 percentage points more likely to enroll for at least four semesters. Unlike previous studies, our estimates are powerful enough to uncover improvements on the extensive margin of college attendance (enrolling in any college), the intensive margin (persistence of attendance), and the quality margin (enrollment at selective, four-year institutions). We conclude by providing non-experimental evidence that more recent cohorts at other campuses in the network increased enrollment at a similar rate.
