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Can Differences Deceive? The Case of “Foreclosure Externalities"

Author

Listed:
  • Anthony Yezer

    (George Washington University)

  • Yishen Liu

    (George Washington University)

Abstract

Foreclosure externalities, in which recent foreclosures proximate to a housing unit depress its sales price, are well accepted in the literature. These papers use a ge- ographic differencing strategy to eliminate the problem of selection into treatment. They also assume that the partial and total derivatives of the outcome (house value) with respect to the treatment (foreclosure) are constant and equal. This paper relaxes these assumptions producing very different results. These findings likely generalize to a larger body of research where differencing often in the form of regression discontinuity, propensity score matching, or synthetic controls is used to achieve identification while assuming total and partial derivatives of the outcome with respect to the treatment are constant and equal.

Suggested Citation

  • Anthony Yezer & Yishen Liu, 2017. "Can Differences Deceive? The Case of “Foreclosure Externalities"," Working Papers 2017-29, The George Washington University, Institute for International Economic Policy.
  • Handle: RePEc:gwi:wpaper:2017-29
    as

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    File URL: http://www2.gwu.edu/~iiep/assets/docs/papers/2017WP/YezerIIEP2017-29.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Foreclosure; Specification error; Loan-to-value ratio; Externalities;
    All these keywords.

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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