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Title: Price regulation and market power: Evidence from manufactured home loans Please click here for the most recent version
Citation Type: Miscellaneous
Publication Year: 2022
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Abstract: Regulation of loan prices is a controversial policy tool. Proponents argue that regulation protects borrowers from high prices, while detractors argue that restricting prices prevents borrowers from obtaining credit. Firm profits play a role in the effects of price regulation. If lenders are profitable enough to offer lower prices while continuing lending activity, borrowers can benefit from price regulation. In this paper, I study a 2014 price regulation in the manufactured home loan market. Manufactured homes, known colloquially as “mobile homes” or “trailers”, are a source of affordable housing for approximately 17 million people in the United States. I find that loan prices fell in response to the 2014 regulation while a similar number of loans with prices near the cap were made, suggesting that borrowers benefited. This response is driven by the largest firm in the market, which made about 90% of affected loans. I show that this firm charges higher prices than other firms to observably similar borrowers, which fits with the finding that they were able to continue lending activity after the restriction was implemented. I then consider how stricter restrictions would affect borrowers and lenders. In order to conduct this counterfactual analysis, I develop and estimate a model of supply and demand for manufactured home loans, estimate borrowers’ price sensitivity, and recover markups. Under progressively stricter rate restrictions, I find that borrowers initially gain surplus from lower prices but are eventually worse off due to the fall in credit supply.
Url: https://helenbanga.github.io/jmp_banga.pdf
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Authors: Willis Banga, Helen
Publisher: UC Berkeley
Data Collections: IPUMS USA, IPUMS NHGIS
Topics: Housing and Segregation, Other
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