Marital Decline: The Role of House Prices and Parental Coresidence
Abstract
Working paper
Over the past 40 years in the U.S., marriage rates have declined significantly while parental coresidence among young adults has increased sharply, especially among the non-college educated. At the same time, rising house prices have outpaced income growth, decreasing housing affordability. This paper analyzes how these rising prices influence coresidence and marriage decisions. I first present a stylized model illustrating the dual impact of higher house prices: they encourage marriage due to economies of scale but also lead to more individuals living with parents, decreasing participation in the marriage market. Then, I develop a quantitative life-cycle model of household formation (marriage and divorce) and housing choices (coresidence, renting, and buying). The model economy is calibrated to the 2019 U.S. economy. I use the model for two exercises. First, I quantify the role of house prices on the marital decline between 1980 and 2019. I find that house prices explain around 50% of the decline in marriage within the model. Furthermore, the model can account for the larger drop in marriage among the non-college educated. Second, I evaluate the effect of housing policies and find that a 10% rental subsidy financed by higher taxes can increase marriage rates among young adults by 5 percentage points, primarily by reducing parental coresidence.
Why Not Tax It? The Effects of Property Taxes on House Prices and Homeownership
Abstract
Working paper
Owner-occupied housing units are exempt from property taxes in many countries. How does this exemption affect house prices, homeownership, and welfare? And if owner-occupied housing were taxed, should the tax be progressive? To address these questions, I develop a life-cycle model of homeownership with heterogeneous agents. The model is calibrated to the Italian housing market, where owner-occupied houses are exempt from property taxes, and these are based on cadastral values that understate market values for expensive properties, creating a regressive property tax system. The results indicate that eliminating only the exemption increases property tax revenues by over 0.9 percentage points of GDP but reduces homeownership by 2.6 percentage points. However, applying a proportional or progressive property tax rate offsets the homeownership decline while maintaining revenue levels. The reform benefits new generations' welfare, though it reduces the average welfare of households existing at the time of the reform, highlighting underlying political tensions.
Opioids and Post-COVID Labor Force Participation
w/
Jeremy Greenwood ,
Nezih Guner, and
Karen A. Kopecky
Abstract
Working paper
At the onset of the COVID-19 pandemic, the labor force participation of the working-age US population dropped by about three percentage points. The recovery was slow, and three years after the start of the pandemic, the labor force participation was still below its pre-pandemic level. The pace of recovery of the labor supply varied widely across US states. To understand this variation, the role of the opioid crisis, which was unfolding in the US before the COVID-19 pandemic, is studied. Labor supply recovery in the aftermath of COVID-19 was slower in states with greater pre-COVID exposure to the opioid crisis, measured by pre-COVID age-adjusted opioid overdose death rates. An event-study analysis shows that a one-standard-deviation increase in pre-COVID age-adjusted death rate is associated with a one percentage point drop in labor force participation after COVID-19. The effect of prior opioid exposure had a more significant impact on individuals without a college degree. The slow recovery in states with more opioid exposure was characterized by an increase in individuals who are not in the labor force due to disability.
