Housing Tenure Status and Housing Satisfaction

Increased knowledge concerning the determinants of perceived consumer satisfaction with housing would permit a more sensitive response to demand in private markets and in the design of government programs to improve the supply of housing. In this study the probability of reporting satisfaction with housing was examined for those who live in single-family homes, duplexes, apartments and mobile homes and for renters and owners. Findings include: (1) housing characteristics were more important determinants of housing satisfaction than the demographic characteristics of housing occupants, (2) mobile-home dwellers were the least likely to be satisfied with their homes, and (3) apartment and duplex dwellers had similar preferences for housing characteristics.     

DOES MONEY MATTER FOR INFLATION IN THE EURO AREA?

We analyze the relationship between M3 growth and inflation within an error correction framework including also the output gap, the 3‐mo EURIBOR, and the 10‐yr government bond yield. We find robust cointegration between money growth and inflation. Shocks in M3 growth account for up to 30% of the inflation forecast error variance, while the effects of output gap and interest rate shocks are mainly transitory. Significantly different dynamics are found during periods at the end of the seventies and beginning of the eighties when interest rate and inflation rate levels were high and real money growth decreasing. (JEL C32, E31, E41)     

Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data

Traditional estimates that often find minimum wage disemployment effects include controls for state unemployment rates and state‐ and year‐fixed effects. Using CPS data on teens for the period 1990–2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and not robust to the source of identifying variation. Including controls for long‐term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long‐run effects. In addition, we do not find evidence that employment effects vary in different parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at the effects of state indexation of the minimum wage.     

Regulatory Capital,Tax, and Earnings Management Effects on Loan Loss Accruals in the Canadian Banking Industry*

Abstract. This paper examines the degree to which managerial discretion over accruals relating to loan losses in the Canadian banking industry during 1977–87 may have been utilized to manage regulatory capital, taxable income, and reported earnings. These years reflect a unique period in which accounting and regulatory practices differed significantly from the post-1987 period. These prior practices created different types of incentives and highlighted different policy issues such as the role of tax benefits in loan loss accrual decisions. We model a three-equation, simultaneous system around three annual discretionary choices: the amount of loan loss experience accrued (based on specific provisions), the size of reserve transfers to the Appropriation for Contingencies (based on general provisions), and the extent of external regulatory capital raised. Results indicate strong support for the capital maintenance predictions and weaker, but significant, support for the tax management predictions. Results do not support the predictions of the earnings management hypothesis. Résumé. Les auteurs examinent la mesure dans laquelle la discrétion dont jouissait la direction dans la présentation des montants cumulatifs des pertes sur prêts, dans le secteur bancaire canadien entre 1977 et 1987, pourrait avoir été mise à profit dans la gestion du capital réglementaire, du revenu imposable et des bénéfices publiés. Cette décennie est unique puisqu'elle se caractérise par le fait que les méthodes comptables et réglementaires présentaient des différences significatives par rapport à celles de la période postérieure à 1987. Les méthodes initiales ont donné naissance à différents types d'incitatifs et mis en relief des questions différentes relatives aux politiques, telles que le rôle des avantages fiscaux dans les décisions touchant les pertes sur prêts cumulatives. Les auteurs créent un modèle à partir d'un système de trois équations concomitantes, autour de trois choix annuels discrétionnaires: le montant cumulatif des pertes sur prêts qui sont subies (basé sur des dispositions précises), l'importance des transferts de réserves aux provisions pour éventualités (basée sur des dispositions générales), et l'importance du capital réglementaire externe recueilli. Les résultats confirment éloquemment les prédictions relatives au maintien du capital et de façon plus tempérée, mais néanmoins significative, les prédictions relatives à la gestion fiscale. Ils ne confirment cependant pas les prédictions relatives à la gestion des bénéfices.     

The Effect of Debt on Perceived Household Welfare

Much of the traditional literature on consumer credit implies that using consumer credit will make families feel worse off but economic investment theory implies the use of consumer credit will not cause a decrease in utility. The effect of changes in debt-asset ratios and other financial and demographic variables on perceived financial well-being are investigated in this article. The results of the analyses indicate families' utility levels did not decrease when they used consumer credit to acquire commodities.     

The Impact of the Rhode Island Catastrophic Health Insurance Plan

Under Rhode Island's statewide Catastrophic Health Insurance Plan (CHIP) in effect since January, 1975, and similar to the Long-Ribicoff National Health Insurance Proposal, Rhode Island pays catastrophic medical expenses over and above a “personal resource payment” (out-of-pocket expenses) that varies with income and amount and type of health insurance coverage. Those with qualified plans (plans providing more services) pay less out-of-pocket. Benefits accrue mainly to some middle income households. CHIP has increased demand for and prices for health insurance with qualifying coverage, and utilization of medical care. Similar impacts on a larger scale may be expected from any national health insurance program.