 Estimating the demand function for differentiated product with endogenous characteristics and heterogeneity of preferences: The case of mortgage loansApplied Econometrics, 2017, vol. 45, 93-115 Abstract: This paper analyzes the mortgage borrowing process from a Russian state-owned supplier of residential housing mortgages concentrating on the estimation of demand function with heterogeneous borrowers’ preferences. Analysis takes into account the underwriting process and the choice of contract terms of all loans originated from 2008 to 2012. Our dataset contains demographic and financial characteristics for all applications, loan terms and the performance information for all issued loans by one regional bank which operates government mortgage programs. We use a multistep semiparametric approach to estimate the determinants of bank and borrower choice controlling for possible sample selection and endogeneity of product characteristics. The main contribution is modeling choice of contract terms as interdependent by structural system of simultaneous equations with heterogeneous marginal effects. We found that demand of low-income households who are unable to afford improving of housing conditions by other instruments than government mortgage is less elastic according to the change both in interest rate and maturity. Keywords: demand; heterogeneity; mortgage (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ris:apltrx:0312 Access Statistics for this article Applied Econometrics is currently edited by Anatoly Peresetsky More articles in Applied Econometrics from Russian Presidential Academy of National Economy and Public Administration (RANEPA) |
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