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.     

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.     

An Information‐Based Theory of Time‐Varying Liquidity

We propose an information‐based theory to explain time variation in liquidity and link it to a variety of patterns in asset markets. In “normal times,” the market is fully liquid and gains from trade are realized immediately. However, the equilibrium also involves periods during which liquidity “dries up,” which leads to endogenous liquidation costs. Traders correctly anticipate such costs, which reduces their willingness to pay. This foresight leads to a novel feedback effect between prices and market liquidity, which are jointly determined in equilibrium. The model also predicts that contagious sell‐offs can occur after sufficiently bad news.     

Securitization,Ratings, and Credit Supply

We develop a framework to explore the effect of credit ratings on loan origination. We show that ratings endogenously shift the economy from a signaling equilibrium, in which banks inefficiently retain loans to signal quality, toward an originate-to-distribute equilibrium with zero retention and inefficiently low lending standards. Ratings increase overall efficiency, provided that the reduction in costly retention more than compensates for the origination of some negative net present value loans. We study how banks' ability to screen loans affects these predictions and use the model to analyze commonly proposed policies such as mandatory “skin in the game.”     

Product Market Competition and Human Resource Practices in the Retail Food Sector

In the wake of Wal‐Mart and other mass merchandisers’ entry into food retailing, the nature of competition in the industry has changed radically. Using longitudinal data on workers and firms to construct measures of compensation and churning for traditional food retailers, this paper examines how these measures change in response to mass merchandiser entry. While there is considerable heterogeneity across retail food establishments, human resource practices are persistent even in the face of new external competition.