Neighborhood Information Externalities and the Provision of Mortgage Credit
AbstractRecent theoretical models and empirical analyses argue that mortgage market activity creates information and lowers the costs of underwriting mortgages. We re-examine this question using models that control for neighborhood-lender fixed effects and address the potential endogeneity of market volume using information on lagged volumes. We find that the omission of neighborhood fixed effects substantially biases analyses of the effect of neighborhood volume on underwriting, and our tests imply that the one or two period lags of volume typically used in cross-sectional studies cannot be treated as exogenous due to the persistence of neighborhood economic shocks. In our preferred specification, we cannot rule out the possibility that overall market activity has a small positive influence on mortgage underwriting, but the statistical evidence for the existence of such effects is weak. On the other hand, we find that lender-specific activity in a neighborhood has strong positive effects on the mortgage approval decision, and this effect is underestimated in traditional cross-sectional models.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2010-10.
Length: 27 pages
Date of creation: May 2010
Date of revision:
Contact details of provider:
Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
More information through EDIRC
Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- G2 - Financial Economics - - Financial Institutions and Services
- L8 - Industrial Organization - - Industry Studies: Services
- R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-04 (All new papers)
- NEP-BAN-2010-06-04 (Banking)
- NEP-URE-2010-06-04 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
- Xiaoming Li, 2011. "Fixed Effects Estimation in Panel Nonlinear Fractional Response Models," Working papers 2011-11, University of Connecticut, Department of Economics.
- AKM Rezaul Hossain, 2010. "Branch location choice: Do lenders discriminate?," Economía, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, vol. 35(30), pages 11-55, July-Dece.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kasey Kniffin).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.