This paper introduces a measure of credit score performance that abstracts from the influence of "situational factors." Using this measure, we study the role and effectiveness of credit scoring that underlied subprime securities during the mortgage boom of 2000-2006.
We revisit the role of limited commitment in a dynamic risk-sharing setting with private information. We show that a Markov-perfect equilibrium, in which agent and insurer cannot commit beyond the current period, and an infinitely-long contract to which only the insurer can commit, implement identical consumption, effort and welfare outcomes.
We examine the interaction between foreign aid and binding borrowing constraint for a recipient country. We also analyze how these two instruments affect economic growth via non-linear relationships. First of all, we develop a two-country, two-period trade-theoretic model to develop testable hypotheses and then we use dynamic panel analysis to test those hypotheses empirically. Our main findings are that: (i) better access to international credit for a recipient country reduces the amount of foreign aid it receives, and (ii) there is a critical level of international financial transfer, and the marginal effect of foreign aid is larger than that of loans if and only if the transfer (loans or foreign aid) is below this critical level.
Do parents alter their investment in their child’s human capital in response to changes in school inputs? If they do, then ignoring this effect will bias the estimates of school and parental inputs in educational production functions.
We study the optimal auditing of a taxpayer’s income in a dynamic principal- agent model of hidden income. Taxpayers in our model initially have low income and stochastically transit to high income that is an absorbing state.
This article examines the distributional burden of different price-point instant lottery games. Theoretical reasons exist for expecting higher-priced instant lottery games to be less regressive than lower-priced instant games.
Using a dynamic panel data framework, we investigate the relationship between the two major forms of terrorism and foreign direct investment (FDI). We then analyze how these relationships are affected by foreign aid flows.
We extend earlier models of economic growth and development by exploring the effect of economic freedom on U.S. state employment growth. We find that states with greater economic freedom – defined as the protection of private property and private markets operating with minimal government interference – experienced greater rates of employment growth.
Spatial heterogeneity of the determinants of airport noise is explored using houses sold near the Atlanta airport. Ordered probit locally weighted regressions (OPLWR) produce results substantively different than those using standard ordered probit.
Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework.
The number of commercial banks in the United States has fallen by more than 50 percent since 1984. This consolidation of the U.S. banking industry and the accompanying large increase in average (and median) bank size have prompted concerns about the effects of consolidation and increasing bank size on market competition and on the number of banks that regulators deem “too–big–to–fail.”
The burdens of a recession are not spread evenly across demographic groups. The public and media, for example, noticed that, from the start of the current recession in December 2007 through June 2009, men accounted for more than three quarters of net job losses.
A standard object of empirical analysis in labor economics is a modified Mincer wage function in which an individual’s log wage is specified to be a function of education, experience, and an indicator variable identifying race.
Recent state-wide smoking bans are likely the most significant regulations imposed on the casino gaming industry. We explore the effects that the Illinois state smoking ban has had on Illinois casino revenue and attendance as well as casino tax revenue.
What was hiding behind the aggregate commercial bank loans through the end of 2008? We use balance sheet data for every insured U.S. commercial bank from 1999:Q1 to 2008:Q4 to construct credit expansion and credit contraction series and provide new evidence on changes in lending.