| Abstract: | This paper has important methodological implications for the literature on regional variation of mortgage yields. Previous studies typically estimate models of regional disparities in mortgage yields using single-equation regression techniques. It is well known, however, that such methods can lead to biased estimates when simultaneity exists. In this paper it is demonstrated that the single-equation approach, when applied to mortgage data from the 1980s, produces radically different results from the previous literature. It is further demonstrated that simultaneous-equations techniques resolve these apparent anomalies. |
