Explaining the Rent–OER Inflation Divergence, 1999–2007

U.S. Rent inflation has often greatly exceeded Owners' Equivalent Rent (OER) Inflation. Why? Critics believe that the Bureau of Labor Statistics is making a faulty utilities adjustment to OER and that the Federal Reserve Board should focus only on Rent inflation. Both beliefs are misguided. Herein we decompose the historical Rent–OER inflation differential into its various determinants. The utilities adjustment, which is necessary, sometimes contributed, but is no smoking gun. The main culprit was an economically interesting pattern of differential rent inflation across locales within cities, one common to many cities. Surprisingly, rent control also played a role.     

Engineering Occupational Choice, 1950–1965

This study has attempted to explain how the flow of engineers into the profession responded to market forces during the 1950–1965 period. The conventional explanation consists of two steps. The difference between the quantity supplied and the quantity demanded, at prevailing salaries, causes salary variation. Then, relative salary variations are supposed to cause supply variations. But in the case of the engineering labor market, while supplies vaned considerably, relative salaries did not. Consideration of the behavior of individuals has led us to believe that the second step of the conventional theory may be unnecessary. In a pervasively employment-conscious culture, variations in the availability of jobs seem to be a principal determinant af supply. This finding is actually quite consistent with economic theory which postulates supply as a function of expected earnings. It does suggest, however, that some consideration be given to changing the traditional emphasis from variations in earnings to variations in expectations.     

Skyscrapers and the Skyline: Manhattan, 1895–2004

This article investigates the market for skyscrapers in Manhattan from 1895 to 2004. Clark and Kingston (1930) have argued that extreme height is a result of profit maximization, while Helsley and Strange (2008) posit that skyscraper height can be caused, in part, by strategic interaction among builders. I provide a model for the market for building height and the number of completions, which are functions of the market fundamentals and the desire of builders to stand out in the skyline. I test this model using time series data. I find that skyscraper completions and average heights over the 20th century are consistent with profit maximization; the desire to add extra height to stand out does not appear to be a systematic determinant of building height.     

–Nonrecourse Mortgage and Housing Price Boom,Bust, and Rebound

This paper investigates the impact of –nonrecourse vs. recourse mortgages on housing price dynamics in major U.S. metropolitan statistical areas for the period from 2000 to 2013. We find evidence that –nonrecourse states experience faster price growth during the boom period (2000–2006), a sharper price drop during the bust period (2006–2009) and faster price recovery in the rebound period after a crisis (2009–2013). Moreover, the volatility of housing prices is higher in nonrecourse states than in recourse states, particularly during the rebound period.     

Inflation Protection from Homeownership: Long‐Run Evidence, 1814–2008

This article examines the inflation hedging capacity of the private home. We employ unique long‐term data for inflation, house price dynamics and rents for Amsterdam dating back to 1814, allowing us to study total housing returns in different inflation regimes and for varying investment horizons. Our Amsterdam data show that homeownership's protection against actual and expected inflation increases with the investment horizon. This increase is especially strong for horizons up to 10 years. Inflation protection from housing is stronger when inflation is persistent, and the hedging capacities of housing regarding unexpected inflation are weak.     

The Law of the Labour Market — Industrialization,Employment, and Legal Evolution – Simon Deakin and Frank Wilkinson

Books reviewed: The Law of the Labour Market — Industrialization, Employment, and Legal Evolution by Simon Deakin and Frank Wilkinson. Oxford University Press, Oxford, 2005, xxv + 380 pp., ISBN 0 19 8152817, £60.00.