Jack LiebersohnResearchAbstract This paper studies the effects of bank competition on commercial lending. I find that greater competition causes a change in the quantity and composition of businesses receiving loans, with more loans going to larger and safer borrowers. To identify exogenous changes in bank competition, I exploit discontinuities in the application of bank antitrust rules governing mergers. In markets that fall narrowly below regulatory cutoffs, competition declines due to bank mergers. In markets above cutoffs, forced branch divestitures keep competition constant even though mergers occur. Using a difference-in-differences methodology comparing these types of markets, I estimate that antitrust rules cause the Herfindahl Index to fall in relative terms by 180 points and, consistent with greater competition, deposit rates to rise by 0.13 percentage points. Using loan-level data from commercial mortgages, I show that this change in competition is associated with a 5 percent increase in the likelihood that borrowers take a loan from a local bank and an increase in the average borrower size (collateral value) of 10 percent without a change in the average loan-to-value ratio. For banks not directly involved in a merger, lending to large borrowers increases and the nonperforming loan ratio falls by 0.37 percentage points. Overall, my findings support a model in which competition improves the efficiency and quality of bank lending.
Abstract Locational preferences contributed substantially to the United States’ 2000-2006 housing boom. The increasing desirability of inelastic areas, much of which was due to manufacturing’s decline, caused 28 percent of the rise in housing prices. We document population movements towards inelastic areas and create a new local rent index that shows rents and house prices co-moved. We show theoretically why an increase indesirability of inelastic areas would raise prices nationally. Our model also explains the geographic consequences of a national price-rent ratio change. Finally, we quantify thegeography channel by creating new elasticity measures of that cover the entire country. Abstract This paper provides a new explanation for regional variation in the 2000-2006 housing and consumption boom. Cities with relative increases in housing demand resulting from differences in industrial composition had greater house price increases from 2000-2006 and greater declines from 2007-2012. Consistent with theory, price effects are stronger in inelastic cities. City-level differences in housing demand are also correlated with housing supply elasticity. Controlling for demand, I estimate a durables consumption-house price elasticity of 0.08 from 2000-2006, 40% smaller than previous estimates. Post-2006, I estimate an elasticity of 0.31 and find that housing prices rather than demand explain consumption changes.
Abstract Scaling a difference-in-differences effect on an outcome by a difference-in-differences effect on a mediating treatment variable is a longstanding and increasingly common practice in applied microeconomics. We provide a framework for such instrumented difference-in-differences (DD-IV) estimation when the effect of treatment is heterogeneous across a panel of individuals, and propose intuitive assumptions under which DD-IV with panel data identifies a local average treatment effect. Research in progressSecuritization and the Retail Apocalypse with Ricardo Correa and Andrei Zlate Who Benefits From Positive Local Demand Shocks? with Alex Bartik and Jens Kvaerner Labor Income and Investment Decisions with Jens Kvaerner |