This paper develops a new measure of the quality of business environment that complements existing measures of the quality of life. An annual panel of these measures is constructed and analyzed for 37 cities from 1977 to 1995. Findings indicate that many cities attractive to firms are unattractive to households, and vice versa. In addition, the size of a city's workforce increases with improvements in the quality of the business environment. In contrast, cities most likely to be dominated by retirees are those that are less attractive to firms. Additional specifications support theoretical arguments that retirees are drawn to cities in which local attributes are capitalized into lower wages rather than higher rents.

A multinomial logit model of household location choice, in which families choose from a number of mutually exclusive residential location, is estimated. Regression results indicate that the locational choices of white and black households are importantly, but differently, affected by their socioeconomic characteristics; in that regard, black suburbanization patterns are little influenced by large simulated changes in household characteristics. Findings suggest that policies which focus on the educational and earnings opportunities of blacks would likely be largely ineffectual in fostering the integration of predominantly white suburban communities. Copyright 1989 by MIT Press.

Abstract We document changes in borrowers’ sensitivity to negative equity and show heightened borrower default propensity as a fundamental driver of crisis period mortgage defaults. Estimates of a time-varying coefficient competing risk hazard model reveal a marked run-up in the default option beta from 0.2 during 2003–06 to about 1.5 during 2012–13. Simulation of 2006 vintage loan performance shows that the marked upturn in the default option beta resulted in a doubling of mortgage default incidence. Panel data analysis indicates that much of the variation in default option exercise is associated with the local business cycle and consumer distress. Results also indicate elevated default propensities in sand states and among borrowers seeking a crisis-period Home Affordable Modification Program loan modification.

This study tests for the presence of prejudicial or “noneconomic” discrimination on the part of mortgage lenders by evaluating the performance of home mortgage loans. The approach differs from that of previous studies of loan performance in that it is based on the proposition that noneconomic discrimination should be more pronounced in less competitive lending environments, while statistical discrimination should not. Using a rich set of FHA-insured loan records and measures of local market concentration to proxy the competitive environment, we test for the prediction of better loan performance by minority borrowers relative to white borrowers in more concentrated markets. We argue that this approach substantially reduces the potential for omitted-variable bias that has cast a shadow on previous studies of lending discrimination. Results fail to reject the null hypothesis of no noneconomic discrimination.

We demonstrate that asymmetric information between sellers (loan originators) and purchasers (investors and securities issuers) of commercial mortgages gives rise to a standard lemons problem, whereby portfolio lenders use private information to liquidate lower quality loans in commercial mortgage-backed securities (CMBS) markets. Conduit lenders, who originate loans for direct sale into securitization markets, mitigate problems of asymmetric information and adverse selection in loan sales. Our theory provides an explanation for the pricing puzzle observed in CMBS markets, whereby conduit CMBS loans are priced higher than portfolio loans, despite widespread belief that conduit loans are originated at lower quality. Consistent with theoretical predictions of a lemons discount, our empirical analysis of 141 CMBS deals and 16,760 CMBS loans shows that, after controlling for observable determinants of loan pricing, conduit loans enjoyed a 34 basis points pricing advantage over portfolio loans in the CMBS market.