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Title: Structural Demand Estimation with Borrowing Constraints
Citation Type: Miscellaneous
Publication Year: 2015
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Abstract: Structural models of location choice use observed demand to estimate household preferences. However, household demand may be partly determined by borrowing constraints, limiting house- holds’ choice set. Credit availability differs across locations, households, and years. We put forward a model of neighborhood choice where mortgage approval rates determine households’ choice set. Using household-level data, geocoded transactions, and mortgage applications for the San Francisco Bay area, we find that including borrowing constraints leads to higher es- timated preferences for better performing schools and majority-white neighborhoods. General equilibrium estimates of the relaxation of lending standards provide two out-of-sample predic- tions: between 2000 and 2006, (i) a compression of the price distribution and (ii) a decline in black exposure to Whites. Both predictions are supported by empirical observation.
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Authors: Ouazad, Amine; Rancière, Romain
Publisher: CEPR
Data Collections: IPUMS USA
Topics: Other, Population Data Science
Countries: United States