Unemployment risk, house price risk and the transition into home ownership in the United Kingdom

Using household panel data, this paper examines the impact of income uncertainty, in the form of unemployment risk, on home ownership in the United Kingdom. The existing literature based on cross-sectional studies finds a negative relationship between income uncertainty and home ownership. This paper utilises data on transitions into home ownership and exogenous variation in unemployment risk, avoiding the endogeneity of employment to home ownership status. It also conditions the empirical estimates on a measure of house price volatility utilising a local-level house price index to control house price risk, which might also discourage home ownership. Results show a strong role for unemployment risk in lowering the likelihood of house purchase, but no statistically significant role for house price risk.     

Cross-sectional estimation of a simultaneous model of tenure choice and housing services demand

In this paper we analyze the demand for housing services, integrating into a single analysis a systematic treatment of several important conceptual and empirical issues. Our three major objectives are to (1) evaluate the empirical importance of the simultaneity between the tenure choice and consumption level decisions; (2) analyze the relationship between household type and housing demand; and (3) present new estimates of the parameters of housing demand which are based on detailed microdata. In the process, we derive and estimate overall income and price demand elasticities which incorporate the impacts of income and price on both the tenure choice and consumption level decisions.     

Tenure choice and the riskiness of non-housing consumption

This paper analyzes a household's choice of housing tenure within a dynamic utility maximization model that yields simple analytical results under uncertainty of income, housing prices, and rents. Given a housing consumption plan, we show that a decrease in the covariance between a household's earnings and housing rents increases the likelihood of ownership. A household who plans to remain in its home over a long period is more likely to own; a household who plans to remain in its home over a short period is more likely to rent. The higher the covariance between the user cost of a home and that of other properties a household is likely to consider in the future, the more likely the household is to own this home. These predictions of our model find support in recent empirical studies.     

Mobility and optimal tenure choice

In this paper, we offer a dynamic model of the optimal tenure behavior of an individual who faces the possibility of moving multiple times during his lifetime. We also investigate the lifetime effects of such factors as income tax, property tax, transaction costs, and mortgage rates on the household’s tenure choice. The agents in the model utilize a genetic algorithm, a probabilistic search approach, to determine their optimal lifetime tenure choice path. The agents are forward looking in that they anticipate such possible events as changes in jobs, marital status, household size, or dissatisfaction with current residence. Our results suggest several housing policy implications and explain some of the empirical findings in the literature.     

Slums in developing countries: New evidence for Indonesia

This paper uses Indonesian data to provide new evidence on the links between household and dwelling characteristics in a developing country. The results show that higher income and education lead to occupancy of dwellings with better structural characteristics, an effect that is reinforced if the household is large and contains few children. Religion also matters, with non-Buddhist households occupying dwellings with worse structural characteristics. The directions of these effects are mostly consistent with separate estimates of household bid-rent functions, which show that willingness-to-pay for better housing attributes rises with income and education.     

Tenure Choice with Sample Selection: Differences among Alternative Samples

Most tenure choice models using cross-sectional data have used either a sample of recent movers or a sample comprising all households. There are problems with estimating both types of models in cross-sectional data. A sample of recent movers oversamples renters, and a sample of all households will yield estimates based on household decisions made in the past. This research designs a method to correct for sample selection in a sample of recent movers. There are large differences in the importance of age, immigrant status, and immigrant length of stay as predictors of homeownership. At the same time, income effects are similar across models.     

Tenure choice and housing demand in Japan

This paper reports the results of an empirical analysis of tenure choice and housing demand that makes use of household-level data from Japan. The paper finds that the price and permanent-income elasticities of demand for owneroccupied housing are approximately −0.8 and 1.4, respectively, and that these estimates are highly robust. The price elasticity estimate is comparable to those for other countries, but the income elasticity estimate is much higher, possibly because of the greater accuracy of the income variable. It is also found that the tenure choice and housing demand decisions are apparently not made simultaneously.     

Housing Decisions of Young Swedish Adults

Pooled and longitudinal data for the years 1989 and 1992 were used to study the housing decisions of young Swedish adults before and after the 1991 Swedish tax reform. Although the household formation and tenure choice decisions of young adults were found to be simultaneously determined, neglecting the cross-equation correlation between these two decisions had no major impact on the estimated coefficients. Demographic factors were found to significantly affect both the household formation and tenure choice decisions. Economic factors were also found to significantly affect young adults' choice of tenure mode. This is however not the case regarding the household formation decision. Young adults' decision whether to form a household was found to be rather insensitive to economic factors. Furthermore, the impact of the relative cost of owned to rented housing was found to be significantly lower after the 1991 Swedish tax reform. One possible explanation might be the smaller variation in relative cost of owned versus rented housing between households after the 1991 Swedish tax reform. Finally, neglecting household-specific heterogeneity in the tenure choice estimation causes a downward bias in the parameter estimates.     

Inequality and Crime: Separating the Effects of Permanent and Transitory Income*

Earlier studies on income inequality and crime have typically used total income or total earnings. However, it is quite likely that it is the changes in permanent rather than in transitory income that affects crime rates. The purpose of this paper is therefore to disentangle the two effects by, first, estimating region‐specific inequality in permanent and transitory income and, second, estimating crime equations with the two separate income components as explanatory variables. The results indicate that it is important to separate the two effects; while an increase in the inequality in permanent income yields a positive and significant effect on total crimes and three different property crimes, an increase in the inequality in transitory income has no significant effect. Using a traditional, aggregate, measure of income yields insignificant effects on crime.     

The Federal Housing Administration (FHA), tenure choice,and residential land use

This paper extends the standard, urban, residential land-use model to analyze the effects of Federal Housing Administration (FHA) mortgage insurance. On the demand side, households are differentiated by income and tenure; on the supply side, the cost of housing is related to the asset prices of land and structure and the cost of capital. Hypothesizing that capital cost is a function of household tenure and income, tenure is chosen to minimize this cost. The effect of FHA, then, is to expand the housing consumption of moderate-middle income households, by reducing their capital cost, while displacing those whose cost is not reduced.     

Markov-switching models with endogenous explanatory variables II: A two-step MLE procedure

This paper proposes a two-step maximum likelihood estimation (MLE) procedure to deal with the problem of endogeneity in Markov-switching regression models. A joint estimation procedure provides us with an asymptotically most efficient estimator, but it is not always feasible, due to the ‘curse of dimensionality’ in the matrix of transition probabilities. A two-step estimation procedure, which ignores potential correlation between the latent state variables, suffers less from the ‘curse of dimensionality’, and it provides a reasonable alternative to the joint estimation procedure. In addition, our Monte Carlo experiments show that the two-step estimation procedure can be more efficient than the joint estimation procedure in finite samples, when there is zero or low correlation between the latent state variables.     

Exploring the relationship between job satisfaction and organizational commitment: an instrumental variable approach

Abstract

The possible role of job satisfaction (JS) on organizational commitment (OC) has been a very important and hotly debated topic among experts. However, existing studies have yielded mixed results potentially due to utilization of small datasets, different methodological designs, estimation techniques that do not control for potential endogeneity between the variables, or a combination of these issues. Using a large matched employer-employee data-set from Britain (WERS2011), we find that increases in employees’ JS positively influence OC. We also show that this relationship holds when an instrumental variable framework (IV ordered probit/IV probit) is adopted to take into account the potential endogeneity of JS. However, throughout the analysis, the IV estimates are smaller in magnitude in comparison to where JS is considered as an exogenous variable. Moreover, utilising a two-stage probit least square (2SPLS) estimator, we support our previous findings i.e. increased JS is likely to lead to enhanced OC, but we also show that greater OC leads to higher levels of JS suggesting that JS and OC are likely to be reciprocally related. Overall, the IV estimates confirm the importance of addressing the endogeneity issue in the analysis of the relationship between JS and OC.     

Alcohol abuse and employment: a second look

Based on data from the 1988 Alcohol Supplement of the National Health Interview Survey, Mullahy and Sindelar ( 1996 ) (M&S) find, for both men and women, that alcohol abuse results in reduced employment and increased unemployment. The estimates from which they drew these inferences were obtained via the instrumental variables (IV) method, which was implemented in order to account for the potential endogeneity of problem drinking. Though these IV estimates qualitatively supported the prior expectation that problem drinking damages individuals' labour market prospects, they were not found to be statistically significant. The present paper revisits this research and offers a new estimation method which, in addition to accounting for endogeneity, explicitly allows for the inherent non‐linearity of the underlying regression structure. The new method is applied to the same data and variable specifications as those used by M&S for the male subpopulation. Consistent with their results, problem drinking is found to have a positive effect on the probability of unemployment and negative effect on the likelihood of being employed. Unlike their result, however, the latter estimate is statistically significant. An appealing feature of the new method is that it accommodates the likely possibility that alcohol abuse effects are heterogeneous with respect to the observed and unobserved characteristics of individuals in the population. To illustrate this fact, abuse effects are computed for two widely differing subgroups of the population. The large differential between the estimated effects for these two subpopulations demonstrates the potential importance of accounting for heterogeneity. Copyright © 2002 John Wiley & Sons, Ltd.     

Exact computation of max weighted score estimators

We show that exact computation of a family of ‘max weighted score’ estimators, including Manski’s max score estimator, can be achieved efficiently by reformulating them as mixed integer programs (MIP) with disjunctive constraints. The advantage of our MIP formulation is that estimates are exact and can be computed using widely available solvers in reasonable time. In a classic work-trip mode choice application, our method delivers exact estimates that lead to a different economic interpretation of the data than previous heuristic estimates. In a small Monte Carlo study we find that our approach is computationally efficient for usual estimation problem sizes.     

Markov-switching and the Beveridge–Nelson decomposition: Has US output persistence changed since 1984?

We show that, for a class of univariate and multivariate Markov-switching models, exact calculation of the Beveridge–Nelson (BN) trend/cycle components is possible. The key to exact BN trend/cycle decomposition is to recognize that the latent first-order Markov-switching process in the model has an AR(1) representation, and that the model can be cast into a state-space form. Given the state-space representation, we show that impulse-response function analysis can be processed with respect to either an asymmetric discrete shock or to a symmetric continuous shock. The method presented is applied to Kim, Morley, Piger’s [Kim, C.-J., Morley, J., Piger, J., 2005. Nonlinearity and the permanent effects of recessions. Journal of Applied Econometrics 20, 291–309] univariate Markov-switching model of real GDP with a post-recession ‘bounce-back’ effect and Cochrane’s [Cochrane, J.H., 1994. Permanent and transitory components of GNP and stock prices. Quarterly Journal of Economics 109, 241–263] vector error correction model of real GDP and real consumption extended to incorporate Markov-switching. The parameter estimates, the BN trend/cycle components, and the impulse-response function analysis for each of these empirical models suggest that the persistence of US real GDP has increased since the mid-1980’s.     

Nonparametric inference based on conditional moment inequalities

This paper develops methods of inference for nonparametric and semiparametric parameters defined by conditional moment inequalities and/or equalities. The parameters need not be identified. Confidence sets and tests are introduced. The correct uniform asymptotic size of these procedures is established. The false coverage probabilities and power of the CS’s and tests are established for fixed alternatives and some local alternatives. Finite-sample simulation results are given for a nonparametric conditional quantile model with censoring and a nonparametric conditional treatment effect model. The recommended CS/test uses a Cramér–von-Mises-type test statistic and employs a generalized moment selection critical value.     

居京韩国人住房租买选择内在影响因素分析

北京要建设世界城市，研究外国人在北京的住房租买选择，对城市空间布局和房地产发展具有重要实践意义。本文以居京韩国人为研究对象，通过调查访谈所掌握的第一手数据资料，运用卡方（χ^2）检验方法对韩国人在京租买房的内在影响因素进行了分析。研究发现，居京韩国人租买房决策主要与各职业群体对中国当地社会的依存度、家庭收入水平、未来居留时间等因子正相关，与他们在韩国是否有住房没有明显的相关性。另外，驻京大型公司的职员因有其公司给予的住房补贴，一般租房居住，对购房持消极态度。     

Neighbors’ income distribution: economic segregation and mixing in US urban neighborhoods

The paper describes within-neighborhood economic segregation in US metropolitan areas in 1985 and 1993. It uses the neighborhood clusters of the American housing survey, standardized by metropolitan area income and household size, to explore income distribution within neighborhoods at a scale much smaller than the census tract (a representative sample of households or ‘kernels’ and their 10 closest neighbors). Joint and conditional distributions portray neighbors’ characteristics conditional on the kernel’s housing tenure, race, and income. The paper documents both significant income mixing in the majority of US urban micro neighborhoods and the extent of income mixing within neighborhoods of concentrated poverty.     

Chain indices of the cost-of-living and the path-dependence problem: An empirical solution

This paper proposes a new method for estimating true cost-of-living (Konüs) indices, for large numbers of commodities, using data only on prices, aggregate budget shares and aggregate expenditure. Conventional chain indices are path-dependent unless income elasticities are (implausibly) all equal to 1. The method allows this difficulty to be overcome. I show that to estimate a Konüs index, only income and not price elasticities are required. The method is applied to estimate a Konüs price index for 70 products covering nearly all the UK's Retail Prices Index over 1974–2004, using the Quadratic Almost Ideal Demand System. The choice of base year for utility has a significant effect on the index.