Working Papers

I use a natural experiment in 1980s Japan to provide evidence of the feedback loop between corporate borrowing and commercial property investment emphasized in macro-finance models with collateral constraints. Following national land use deregulations, firms located in previously land use constrained areas borrowed and invested more in real estate, reinforcing the initial positive shock to land values. I develop a multi-city spatial model with real estate collateral which uses reduced form estimates of the deregulation on firm outcomes to assess aggregate policy effects. The deregulation and corporate borrowing frictions together amplified the aggregate cycle and promoted growth in superstar cities.

Concerns about housing affordability have led policymakers worldwide to call for property transfer taxes targeting speculators. We estimate the optimal tax on property flips using a sufficient statistics approach which extends the intuition for imposing financial transaction taxes, or Tobin taxes, to the housing market context. The framework incorporates investors’ housing tenure choice and search costs. We apply our approach to a 2011 reform in Taiwan which levied a sales surcharge of up to 15% on investment properties held for two years or less. Linking the universe of personal income tax returns to transaction records, we show via an hedonic bunching design that the tax generated a 75% drop in one-year flips and a 40% drop in overall second home sales volume. We use spatial and time variation in the severity of tropical storm seasons to estimate a 20% share of noise trading prior to the reform. Combining these two sufficient statistics, the optimal transfer tax on short-term sales is 4%, at most, which is close to the flat transfer tax rates imposed in many global real estate markets. Segmentation and lock-in effects limit the ability of Tobin taxes to improve housing affordability.

Growing spatial inequality has led policymakers to enact tax breaks to attract corporate investment and jobs to economically peripheral regions. We demonstrate the importance of multi-plant firms' physical capital structure for the efficacy of place-based policies by studying a national bonus depreciation scheme in Japan which altered the relative cost of capital across locations, offering high-tech manufacturers immediate cost deductions from their corporate income tax bill. Combining corporate balance sheets with a registry containing investment by plant location and asset type, we find the policy generated big gains in employment and investment in building construction and in machines at pre-existing production sites, with an implied fiscal cost per job created of $15,000. These responses are driven by more financially constrained firms and firms which rely on costly but long-lived capital inputs like industrial machines. The policy did not generate positive local spillovers to ineligible plants or spillovers through inter-regional trade networks. Plant-level hiring in ineligible areas outstripped that in eligible areas, suggesting reallocation of resources within the internal capital and labor markets of multi-plant firms attenuates the local benefits of corporate income tax breaks. 

This paper documents heterogeneous spending out of a large stimulus tax rebate by exposure to the 1980s Japanese housing market turbulence. Linking geocoded household expenditure and financial transactions data to a new set of local housing price indices in Japan, we estimate a U-shaped pattern in the marginal propensity to consume with respect to housing price growth. Recipients living in areas with the smallest housing price gains during the 1980s spent 47% of the 1994 rebate within three months of payment, compared to 24% among recipients in areas which experienced the largest housing price gains. We find limited heterogeneity in marginal propensities to consume among households in less affected areas, but MPCs are higher for younger, renter households with no debt residing in more affected areas. Our results are consistent with near-rationality rather than a liquidity constraint story. Winners who are less exposed to housing risk respond more to payments, implying policies which target losers from housing market downturns may be less effective at stimulating consumption.

How governments should choose the frequency of payments has received little attention in the literature on the optimal design of benefits programs. We propose a simple model in which the government chooses the interval length between payments, subject to a tradeoff between costs of providing more frequent benefits and welfare gains from mitigating consumption non-smoothing. Using a high-frequency retail dataset that links consumers to their purchase history, we apply the model to the Japanese National Pension System. Our evidence suggests suboptimal intra-cycle consumption patterns, with negligible retailer price discrimination. Model calibrations support the worldwide prevalence of monthly payment systems. 

Works in Progress

Tax Sales, Private Capital, and Gentrification in the U.S.   [draft available upon request]

Spatially Targeted LTV Policies and Collateral Values.       [draft coming soon]

with Chun-Che Chi & Ming-Jen Lin

The Saved and the Probate: Asset Control and Inheritance Tax Minimization

with Lorenzo Pessina

Microbubbles and Local Property Tax Regimes 

with Takashi Unayama