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Working Papers

Working Papers

  • WP 16-25R2 | The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets


    Kristle Cortés Andrew Glover Murat Tasci

    Abstract

    Since the Great Recession, 11 states have restricted employers' access to the credit reports of job applicants. We document that county-level vacancies decline between 9.5 percent and 12.4 percent after states enact these laws. Vacancies decline significantly in affected occupations but remain constant in those that are exempt, and the decline is larger in counties with many subprime residents. Furthermore, subprime borrowers fall behind on more debt payments and reduce credit inquiries postban. The evidence suggests that, counter to their intent, employer credit check bans disrupt labor and credit markets, especially for subprime workers.   Read More

  • WP 17-24 | The Impact of Tobacco-Free School Laws on Student and Staff Smoking Behavior


    Rachana Bhatt Peter L. Hinrichs

    Abstract

    A number of US states have enacted bans on tobacco use by students, staff, and visitors anywhere on the grounds of public elementary and secondary schools statewide. These laws are intended to reduce tobacco use, reduce exposure to secondhand smoke, reinforce anti-tobacco curricula taught in schools, and prevent children from viewing their teachers and fellow students using tobacco products. We examine the impact that the laws have on the smoking behavior of students, teachers, and other school staff by estimating difference-in-differences models that exploit the time variation in adoption of the laws across states. We generally find that these laws do not impact smoking behavior, although we do find some evidence suggesting a possible effect on nonteaching school staff.   Read More

  • 17-23 | Some Evidence on Secular Drivers of US Safe Real Rates


    Kurt G. Lunsford Kenneth West

    Abstract

    We study long-run correlations between safe real interest rates in the United States and over 20 variables that have been hypothesized to influence real rates. The list of variables is motivated by the familiar intertermporal IS equation, by models of aggregate savings and investment, and by reduced form studies. We use annual data, mostly from 1890 to 2016. We find that safe real interest rates are correlated as expected with demographic measures. For example, the long-run correlation with labor force hours growth is positive, which is consistent with overlapping generations models. For another example, the long-run correlation with the proportion of 40- to 64-year-olds in the population is negative. This is consistent with standard theory where middle-aged workers are high-savers who drive down real interest rates. In contrast to standard theory, we do not find productivity to be positively correlated with real rates. Most other variables have a mixed relationship with the real rate, with long-run correlations that are statistically or economically large in some samples and by some measures but not in others.   Read More

  • WP 16-16R2 | How Do Lead Banks Use Their Private Information about Loan Quality in the Syndicated Loan Market?


    Lakshmi Balasubramanyan Allen Berger Matthew Koepke

    Original Paper: WP 16-16 | Revisions: WP 16-16R

    Abstract

    We formulate and test two opposing hypotheses about how lead banks in the syndicated loan market use private information about loan quality, the Signaling Hypothesis and Sophisticated Syndicate Hypothesis. We use Shared National Credit (SNC) internal loan ratings made comparable using concordance tables to measure private information. We find favorable private information is associated with higher lead bank loan retention and lower interest rate spreads for pure term loans, ceteris paribus, supporting the Signaling Hypothesis. Neither hypothesis dominates for pure revolvers. The data partially support two conjectures about the circumstances under which the two hypotheses are more likely to hold.   Read More

  • 17-22 | Parental Proximity and Earnings after Job Displacements


    Patrick Coate Pawel Krolikowski Mike Zabek

    Abstract

    Young adults, ages 25 to 35, who live in the same neighborhoods as their parents experience stronger earnings recoveries after a job displacement than those who live farther away. This result is driven by smaller on-impact wage reductions and sharper recoveries in both hours and wages. We show that geographic mobility, different job search durations, housing transfers, and ex-ante differences between individuals are unlikely explanations. Our findings are consistent with a framework in which some individuals living near their parents face a better wage-offer distribution, though we find no direct evidence of parental network effects.   Read More

  • WP 17-21 | Costly Information Intermediation as a Natural Monopoly


    Daniel Monte Roberto Pinheiro

    Abstract

    In this paper, we show that information trade has similar characteristics to a natural monopoly, where competition may be detrimental to efficiency due either to the duplication of direct costs or the slowing down of information dissemination. We present a model with two large populations in which consumers are randomly matched to providers on a period-by-period basis. Despite a moral hazard problem, cooperation can be sustained through an institution that gives incentives to information exchange. We consider different information pricing mechanisms (membership vs. buy and sell) and different competitive environments. In equilibrium, both pricing and competitive schemes affect the direct and indirect costs of information transmission, represented by directed fees paid by consumers and the expected loss due to imperfect information, respectively.   Read More

  • WP 17-20 | Convergence of Cultural Traits with Time-Varying Self-Confidence in the Panebianco (2014) Model--A Corrigendum


    Fabrizio Panebianco Anja Prummer Jan-Peter Siedlarek

    Abstract

    We highlight that convergence in repeated averaging models commonly used to study cultural traits or opinion dynamics is not equivalent to convergence in Markov chain settings if transition matrices are time-varying. We then establish a new proof for the convergence of cultural traits in the model of Panebianco (2014) correcting the existing proof. The new proof provides novel insights on the long-run outcomes for inessential individuals. We close with a discussion of conditions for convergence in repeated averaging models with time-varying transition matrices.   Read More

  • WP 17-19 | Comparison of Small Bank Failures and FDIC Losses in the 1986–92 and 2007–13 Banking Crises


    Edward S. Prescott Eliana Balla Laurel Mazur John Walter

    Abstract

    Failure rates of small commercial banks during the banking crisis of the late 1980s were about 7.6%, which is significantly higher than the 5.7% failure rate during the recent crisis. We compare failure rates in the two periods using a statistical model that allows us to decompose the effect of changes in bank characteristics and economic shocks on failure rates. We find that the severe economic shocks of the recent crisis had a larger impact on high bank failure rates than bank characteristics.   Read More

  • WP 17-17 | Testing for Differences in Path Forecast Accuracy: Forecast-Error Dynamics Matter


    Andrew B. Martinez

    Abstract

    Although the trajectory and path of future outcomes plays an important role in policy decisions, analyses of forecast accuracy typically focus on individual point forecasts. However, it is important to examine the path forecasts errors since they include the forecast dynamics. We use the link between path forecast evaluation methods and the joint predictive density to propose a test for differences in system path forecast accuracy. We also demonstrate how our test relates to and extends existing joint testing approaches. Simulations highlight both the advantages and disadvantages of path forecast accuracy tests in detecting a broad range of differences in forecast errors. We compare the Federal Reserve's Greenbook point and path forecasts against four DSGE model forecasts. The results show that differences in forecast-error dynamics can play an important role in the assessment of forecast accuracy.   Read More

  • 16-25r | The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets


    Kristle Cortés Andrew Glover Murat Tasci

    Abstract

    We document that county-level job vacancies decline between 9.5 and 12.4 percent after states enact laws that restrict employers' access to the credit reports of job applicants. The evidence suggests that, counter to their intent, employer credit-check bans disrupt labor and credit markets, especially for workers who are subprime borrowers.   Read More