Lots of Money
The marginal value of public pension wealth: Evidence from border house prices
Darren Aiello et al.
Journal of Financial Economics, October 2025
Abstract:
We study how state pension windfalls affect property prices near state borders, where theory suggests real estate reflects the value of additional public resources. Windfalls, representing a source of state revenue about half the size of total taxes, provide economically significant and plausibly exogenous variation in fiscal conditions. We find that each dollar of pension asset returns increases border house prices by approximately two dollars, suggesting that governments allocate additional funds towards high-value projects or tax abatement rather than wasting incremental resources. Evidence of larger effects in financially constrained municipalities highlights how fiscal resources amplify welfare effects of economic shocks.
Baby Booms and Asset Booms: Demographic Change and the Housing Market
Marc Francke & Matthijs Korevaar
Journal of Finance, forthcoming
Abstract:
Based on centuries of data, we demonstrate that demographics have been a major, predictable driver of house prices. High birth rates 25 to 29 (60 to 64) years ago predict declining (rising) rent-price ratios today. This pattern arises from age-concentrated entry into and exit from homeownership affecting house prices, rather than changes in housing consumption that could also impact rents. We provide evidence for possible mechanisms: slow responses of other market participants to shifts in homeownership demand, and geographic segmentation between rental and owner-occupied markets. Evidence for age-dependent demand effects on yields of bonds and stocks is significantly weaker.
Corporate share repurchases and the 2023 excise tax
Don Autore et al.
Journal of Corporate Finance, November 2025
Abstract:
The Inflation Reduction Act of 2022 imposes a 1% excise tax on US corporate share repurchases, effective January 1, 2023. The tax's implementation is associated with a significant decline in corporate repurchases that is not offset by a corresponding increase in dividends. Aggregate repurchases decline from about $1 trillion in 2022 to just over $800 billion in 2023, and the average firm reduces quarterly repurchases (as a fraction of market capitalization) by roughly 25%. The decline in repurchases by US firms far exceeds a contemporaneous decline in repurchases by Canadian firms, is large in a historical context, and is not driven by firm fundamentals. Tax-induced cuts to repurchases are associated with an increase in cash but no increase in investment, implying that the tax has not generated the stated policy objective.
Defunding controversial industries: Can targeted credit rationing choke firms?
Kunal Sachdeva et al.
Journal of Financial Economics, October 2025
Abstract:
This paper examines the effects of targeted credit rationing by banks on firms likely to generate negative externalities. We exploit an initiative of the U.S. Department of Justice, labeled Operation Choke Point, which compelled banks to limit relationships with firms in controversial industries. Using supervisory loan-level data, we show that, as intended, targeted banks reduced lending and terminated relationships with affected firms. However, most of these firms fully substituted credit through nontargeted banks under similar terms. Overall, we find no significant shifts in the performance and investment of affected firms, suggesting that targeted credit rationing is widely ineffective in promoting change.
Optimal taxation and the Domar-Musgrave effect
Brendan Beare & Alexis Akira Toda
Economic Inquiry, forthcoming
Abstract:
This article concerns the optimal choice of flat taxes on labor and capital income, and on consumption, in a tractable economic model in which agents are subject to idiosyncratic investment risk. We identify the tax rates which maximize welfare in stationary equilibrium while preserving tax revenue, finding that an increase in welfare equivalent to a permanent increase in consumption of nearly 7% can be achieved by only taxing capital income and consumption. The Domar-Musgrave effect explains cases where it is optimal to tax capital income. We characterize the dynamic response to the substitution of consumption taxation for labor income taxation.
Shifting tax incidence: Evidence from the Washington State cannabis market
Benjamin Hansen et al.
Journal of Policy Analysis and Management, forthcoming
Abstract:
We study how prices respond when a 25% gross receipts tax remitted by cannabis manufacturers was eliminated in Washington state and the retail excise tax was simultaneously increased from 25% to 37%. Standard theory suggests that this change should have increased welfare for manufacturers, retailers, and consumers; instead, our analysis shows that the reform unexpectedly shifted benefits toward manufacturers at the expense of retailers and consumers, who faced higher tax-inclusive prices post-reform. We hypothesize that this outcome was driven by behavioral factors such as anchoring and loss aversion. Our findings add to a growing body of evidence that tax reforms can affect market outcomes in ways not predicted by standard economic models, offering a cautionary lesson for policymakers considering similar reforms.
Information Technology in Banking and Entrepreneurship
Toni Ahnert et al.
Management Science, forthcoming
Abstract:
We study the importance of information technology (IT) in banking for entrepreneurship. Guided by a parsimonious model, we establish that job creation by young firms is stronger in U.S. counties more exposed to banks with greater IT adoption. We present evidence consistent with banks' IT adoption spurring entrepreneurship through a collateral channel: entrepreneurship increases by more in IT-exposed counties when house prices rise. Further analysis suggests that IT improves banks' ability to determine collateral values, in particular when collateral appraisal is more complex. IT also reduces the time and cost of disbursing collateralized loans.
Capitalization of state tax rates in housing values at state borders, 2000-2017
Yulong Chen, Liyuan Ma & Peter Orazem
Real Estate Economics, forthcoming
Abstract:
We derive a model that demonstrates the interrelationship between housing prices, tax rates, government services, and naturally occurring amenities between adjacent markets. The model is tested against county-level data at state borders using US Census housing price data from 2000 to 2017. The data show that property taxes will lower housing prices at state borders by an average of $197 per mill rate or $3326 in 2017 prices. The capitalization rate of property taxes at state borders is 14.4%. The largest tax-induced gap in average housing prices is at the New York-Connecticut border.
Location, location, structure type: Rent divergence within neighborhoods
Brian Adams & Randal Verbrugge
Journal of Housing Economics, September 2025
Abstract:
Housing rents are a large share of household budgets and make a large contribution to overall inflation. Hence rent measurement accuracy is necessary in these and other contexts. The location-location-location hypothesis suggests that rents within a neighborhood would grow at the same rate on average; prior research has both theoretically assumed, and empirically supported, this hypothesis. We show that, even within the same neighborhoods, rent inflation rates for different types of housing units often differ for years. Over the 2010s, apartment rents generally outpaced detached unit rents; this pattern reversed during the COVID-19 pandemic -- providing nuance to prevailing narratives about the latter period, most of which are location-specific. These dynamics suggest that structural representativity is necessary for rent index accuracy and accurate inflation measurement. Even indexes based on careful geographical sampling, such as the United States Consumer Price Index's (CPI's) Owners' Equivalent Rent component prior to 2023, may be biased by placing too much weight on apartment rents compared to detached unit rents. We demonstrate that this bias may be quite large, and offer recommendations -- one of which was recently accepted by the CPI.