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Category Archives: R2

Where You Live and Where You Move: A Cross-City Comparison of the Effects of Gentrification and How these Effects Are Tied to Racial History

By Divya Juneja   

This thesis compares the effects of gentrification on school and air quality in ten cities to see whether cities with larger amounts of white flight post-World War II exhibited worse gentrification effects on renters. I find that renters in high white flight cities more consistently experience school quality downgrades—likely attributed to moving from gentrifying neighborhoods to worse neighborhoods. High white flight meant widespread de-investment across neighborhoods which could have lowered the school quality experienced by displaced renters. Gentrification did not consistently affect air quality in any way related to white flight, meaning confounding variables could have influence.

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Advisors: Professor Christopher Timmins, Professor Alison Hagy | JEL Codes: R2, R3, J11

An Unequal Dream: The Mortgage Rate Premium Paid by Black Communities

By Michael Nicholson   

This paper analyzes loan pricing discrimination against predominantly black communities in U.S. mortgage markets. Building on previous literature, this paper posits that ceteris paribus predominantly black communities continue to face economically significant discrimination in mortgage pricing. Ultimately, this paper concludes that predominantly black communities face 10-14 basis points of pricing discrimination in mortgage loans which corresponds to 12.6-17.6% higher rate spreads. This estimation comes after accounting for geographic and lender effects, borrower quality, tract-level characteristics, and loan type. These results confirm past findings of pricing discrimination and illustrate yet another financial barrier for black households in this country.

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Advisors: Professor Emma Rasiel, Professor Kent Kimbrough | JEL Codes: R2, J15, G21

Is Inclusionary Zoning a Proper Remedy for the Affordable Housing Crisis? —A Case Study of IZ Programs in New Jersey and North Carolina

By Xinchen Li

The recent decade witnessed a worsening of the affordable housing crisis across the
country. Inclusionary zoning (IZ) has been a popular municipal remedy for the crisis.
However, it is unclear whether IZ actually adds to the affordable housing stock, and
whether it achieves its goal at the expense of average homeowners. Through a case
study of New Jersey and North Carolina, this paper aims to address these two questions.The results suggest that there is no statistically significant positive relationship between the presence of IZ and the housing price in the two states, but its beneficiary effects are also debatable.

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Advisors: Professor Christopher Timmins | JEL Codes: D10 ; R2; R21

Durham and Gentrification: Assessing the Impact of Displacement in the Bull City

By Armin Hakimzadeh Ameri

In this paper, I look to Durham, North Carolina, to demonstrate potential harms from gentrification. Using an expansive proprietary dataset, I come to two main conclusions: first, there is a significant link between gentrification and displacement, as low-income renters are constrained by increased prices and are forced to leave their neighborhoods. Second, displaced renters are significantly more likely to move into communities with higher crime rates, worse schools, and increased rates of poverty. These results suggest that the Durham government should enact policies protecting low-income renters and other at-risk groups while also balancing the benefits of gentrification.

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Advisors: Dr. Christopher Timmins, and Dr. Grace Kim | JEL Codes: R2, R3

Benefit Spillovers and Higher Education Financing: An Empirical Analysis of Brain Drain and State-Level Investment in Public Universities

By Chinmany G. Pandit

This paper analyzes the impact of out-migration of college graduates on state higher education investment. A three-stage least squares regression model with state and year fixed effects is developed and estimated, addressing the relationship between state legislative appropriations, tuition, and educated out-migration across 49 U.S. states from 2006-2015. The results support the notion that states respond negatively to benefit spillovers in higher education: for every one percent increase in the rate of educated out-migration, state appropriations decrease by 1.92 percent (roughly $140 per student). These findings suggest that an education subsidy
provided to states may be necessary to prevent underinvestment in higher education.

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Advisor: Thomas Nechyba | JEL Codes: H7, H75, I22, I28, R23

The Effect of Minority History on Racial Disparities in the Mortgage Market: A Case Study of Durham and New Haven

By Jisoo Yoon

In the aftermath of the housing market crash, the concentration of subprime mortgage loans in minority neighborhoods is a current and long-standing issue. This study investigates the presence of racial disparities in mortgage markets by examining two cities with contrasting histories of African American and Hispanic establishment: Durham, North Carolina and New Haven, Connecticut. This study examines data by the Home Mortgage Disclosure Act (HMDA), and distills the effect of minority legacy on the perception of racial risk by using econometric instruments to separate the behavior of national lenders and local lenders. The econometric methods allow national lenders to reflect objective risk measures and neighborhood race dynamics, while local lenders reflect subjective attitudes towards certain races. With its longer history of African American presence, Durham shows a positive attitude towards Black borrowers at the local level, while New Haven shows a more favorable attitude towards its Hispanic residents. Nonetheless, racial legacy also materializes as a negative factor in the form of increased residential segregation and spillover effects. Furthermore, a temporal variation analysis of pre- and post-mortgage market reform data affirms the disappearance of racial bias and continued presence of spillover risk in Durham.

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Advisor: Christopher Timmins | JEL Codes: C01, G21, J15, R21, R23, R31 | Tagged: Econometrics, Mortgages, Economics of Minorities, Races, Census, Migration, Population, Neighborhood Characteristics, Housing Supply and Market

The effect of Mexico’s Conditional Cash Transfer Program on Migration Decisions

By Aki Ishikawa

The Mexican conditional cash transfer program, Oportunidades, is commonly overlooked for long-term evaluations. One understudied effect of this poverty-reduction program is the change in migration behavior caused by the cash transfers. Using data from the Mexican Family Life Survey, this study outlines the effects of the social net program on international migration of low-income households in Mexico. The results suggest that the program causes a positive increase in likelihood for international migration for program participants. Within participating households, individuals who are responsible for grant income tend to migrate less compared to the other members of the households. This research provides valuable insight into existing literature on migration of low-income households in relation to the availability of the conditional cash transfer program.

Honor’s Thesis

Data Set

Advisor: Charles Becker | JEL Codes: R2, R23, R28 | Tagged: Conditional Cash Transfer Program, Developmental Economics, International Migration

The Impact of Population Mobility on repayment Rates in Microfinance Institutions

By Allison Vernerey

Several studies have attempted to model the determinants of repayment rates for group-based loans administered by micro-finance institutions (MFIs). One of the main variables that have been identifies as playing a role in determining the repayment rate is social capital. Empirical research however has struggled with quantifying this qualitative variable, resulting in vast inconsistencies across studies, aggravating cross-comparison and objective interpretation. Instead, we argue that the use of quantitative, cross-country comparable proxy that is intuitively linked to social capital would yield more consistent and reliable results. We hypothesize that population mobility is such a proxy, and that lower population mobility correlates positively with higher social capital and thus higher repayment rates. Using population mobility as a proxy for social capital would allow MFIs to lower their cost of data collection for performance assessments and simplify the process for policy makers trying to evaluate the programs success. At the village level, we find significant evidence that higher emigration within a community is strongly linked to lower repayment rates in micro-finance. These results provide micro-finance institutions with a new and more cost effective way to monitor their performance as well as improve their capacity to make well-informed lending decisions.

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Advisor: Genna Miller | JEL Codes: G, G2, G21 | Tagged: Bangladash, Microfinance Institutions, Population Mobility, Repayment Rates, Social Capital

Race and Pollution Correlation as Predictor of Environmental Injustice

By Marissa Meir

Environmental injustice is a theory that claims distributions of toxic, hazardous and dangerous waste facilities are disproportionately located in low-income communities of color. This paper empirically demonstrates an alternative cause of environmental injustice- that low-income minorities are less likely to receive sizeable enough loans to buy a house in a cleaner area. It highlights a significant time in history, from 1999 to 2007, when wealth constraints were eased and loan amounts increased for people with the same income. The results show that minorities increase their demand of environmental goods given an increase in loan amounts, suggesting that people of color care about environmental quality, but, due to wealth constraints, do not have the same opportunities
in the housing market.

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Advisor: Christopher Timmins | JEL Codes: P46, P48, Q50, Q53, Q56, Q58, R20, R21, R31, R32 | Tagged: Air Quality, Environmental Injustice, Housing Market, Income, Loan, Wealth Constraints

Trailer Park Economics

By Caitlin Gorback

In this paper, we explore the various reasons behind the development of the American institution of trailer parks. The first two models arise in equilibrium, the last two respond to housing shocks. Models include “Bad Tenants” in which tenants and landowners contract to protect against bad neighbors, a basic “Capital Constraints model in which tenants and landowners share the burden of capital costs, “Uncertain Growth” in which landowners respond to boom and bust economic growth, and “Long vs. Short Run Growth” in which landowners must decide how to invest on their land given rates of land appreciation.

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Advisor: Charles Becker | JEL Codes: R21, R23, R31 | Tagged: Housing, Manufactured Housing, Rural Growth, Trailer Parks, Urban Growth

Questions?

Undergraduate Program Assistant
Jennifer Becker
dus_asst@econ.duke.edu

Director of the Honors Program
Michelle P. Connolly
michelle.connolly@duke.edu