Can Differences Deceive? The Case of “Foreclosure Externalities"

Anthony Yezer and Yishen Liu
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Yishen Liu: George Washington University

Working Papers from The George Washington University, Institute for International Economic Policy

Abstract: Foreclosure externalities, in which recent foreclosures proximate to a housing unit depress its sales price, are well accepted in the literature. These papers use a ge- ographic differencing strategy to eliminate the problem of selection into treatment. They also assume that the partial and total derivatives of the outcome (house value) with respect to the treatment (foreclosure) are constant and equal. This paper relaxes these assumptions producing very different results. These findings likely generalize to a larger body of research where differencing often in the form of regression discontinuity, propensity score matching, or synthetic controls is used to achieve identification while assuming total and partial derivatives of the outcome with respect to the treatment are constant and equal.

Keywords: Foreclosure; Specification error; Loan-to-value ratio; Externalities (search for similar items in EconPapers)
JEL-codes: R23 R30 R31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2017
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2017-29

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