Single Parents - Single Outcomes?

This master thesis seeks to evaluate the social economic wellbeing of single parent households across eleven European countries. Starting with market income, taxes and transfers are incorporated to arrive at a disposable income figure. Effort is further made to include the value of in kind transfers, more specifically education and health care services. This results in an extended income concept, where redistribution both in cash and in kind is accounted for. Income figures for market income and disposable income are retrieved from the Luxembourg Income Study (LIS). The data is based on national surveys from 2004/2005, and include on average 593 single parent households per country. Data on education expenditures are taken from the Euro stat database and include primary and secondary education. In line with previous literature on public services, tertiary education is excluded from the analysis. Data on health care expenditures are found in the OECD Health database, and include all public expenses related to health care. Health care income is allocated to the households based on the so called insurance principle, in which expected health care usage is dependent on age and sex. All income figures, both in cash an in kind, are adjusted according to the square root equivalence scale. Borrowing from an extensive literature on welfare state typology, the eleven sample countries are classified into five different welfare regimes; Scandinavian, Anglo-Saxon, Bismarckian, Southern and Post-communist. The hypothesis of this thesis is that single parents gain more in welfare regimes with universal, rather than targeted, social benefits, implying that the level of redistribution should be particularly high in the Scandinavian countries. The underlying reasoning is that popular support for public redistribution is higher with universal coverage, thereby resulting in more generous social services. This is in line with the findings of Moene and Wallerstein (2001), Brady and Burroway (2012), Mitchell et al (1994) and Korpi and Palme (1998). Single parents are found to obtain an equalized market income only 60% as high as other parents. This figure increases to 72% once the tax-transfer system is accounted for, implying an increase in relative income of around 20%. Adding education and health care benefits to the analysis further increases relative single parent income by 10%, resulting in a total equalized income 79% as high as other parents. Cash redistribution is thus found to account for two thirds of the redistributive effect, while the remaining impact is caused by in kind income. Including more publicly provided goods in the analysis should increase the relative importance of in kind redistribution further. Total redistribution is found to be high in the Nordic countries, at above 50%. In accordance with the hypothesis, it thus seems as though single parents are important beneficiaries of universal welfare regimes, even though these do not specifically target low income households. The results further suggest that type of welfare regime is an important indicator in assessing the re-distributional gain directed at single parent households

The Saving and Employment Effects of Higher Job Loss Risk

In this paper we use Norwegian tax data and a novel natural experiment to isolate the impact of job loss risk on saving behavior. We find that a one percentage point increase in job loss risk increases liquid savings by roughly 1.2 - 2.0 percent. Further, we show that employment falls in non-tradable industries not directly affected by the shock, also after controlling for intersectoral linkages and lower demand from affected industries, consistent with the household demand channel of recessions.publishedVersio

Mortgage regulation and financial vulnerability at the household level

We evaluate the impact of mortgage regulation on credit volumes, household balance sheets and the reaction to adverse economic shocks. Using a comprehensive dataset of all housing transactions in Norway matched with buyers' balance sheet information from official tax records, we identify causal effects of mortgage loan-to-value (LTV) limits. Our results show that LTV-requirements have substantial effects on credit volumes, especially on the extensive margin. As a result, such requirements contribute to dampening aggregate credit growth. We find that affected households lower their debt uptake and face lower interest expenses, thereby reducing their vulnerability to adverse shocks. However, affected households also deplete liquid assets when purchasing a home, in order to meet the new requirement. This negative effect on liquid savings persists in the years following the house purchase, suggesting that the impact on financial vulnerability at the household level is in fact ambiguous. We illustrate this further by documenting that households affected by the regulation are more likely to sell their home when becoming unemployed compared to non-affected households.publishedVersio

The Saving and Employment Effects of Higher Job Loss Risk

In this paper we use Norwegian tax data and a novel natural experiment to isolate the impact of job loss risk on saving behavior. We find that a one percentage point increase in job loss risk increases liquid savings by roughly 1.2 - 2.0 percent. Further, we show that employment falls in non-tradable industries not directly affected by the shock, also after controlling for intersectoral linkages and lower demand from affected industries, consistent with the household demand channel of recessions

Negative Nominal Interest Rates and the Bank Lending Channel

Following the crisis of 2008, several central banks engaged in a new experiment by setting negative policy rates. Using aggregate and bank level data, we document that deposit rates stopped responding to policy rates once they went negative and that bank lending rates in some cases increased rather than decreased in response to policy rate cuts. Based on the empirical evidence, we construct a macro-model with a banking sector that links together policy rates, deposit rates and lending rates. Once the policy rate turns negative, the usual transmission mechanism of monetary policy through the bank sector breaks down. Moreover, because a negative policy rate reduces bank profits, the total effect on aggregate output can be contractionary. A calibration which matches Swedish bank level data suggests that a policy rate of - 0.50 percent increases borrowing rates by 15 basis points and reduces output by 7 basis points.publishedVersio

Mortgage regulation and financial vulnerability at the household level

We evaluate the impact of mortgage regulation on credit volumes, household balance sheets and the reaction to adverse economic shocks. Using a comprehensive dataset of all housing transactions in Norway matched with buyers' balance sheet information from official tax records, we identify causal effects of mortgage loan-to-value (LTV) limits. Our results show that LTV-requirements have substantial effects on credit volumes, especially on the extensive margin. As a result, such requirements contribute to dampening aggregate credit growth. We find that affected households lower their debt uptake and face lower interest expenses, thereby reducing their vulnerability to adverse shocks. However, affected households also deplete liquid assets when purchasing a home, in order to meet the new requirement. This negative effect on liquid savings persists in the years following the house purchase, suggesting that the impact on financial vulnerability at the household level is in fact ambiguous. We illustrate this further by documenting that households affected by the regulation are more likely to sell their home when becoming unemployed compared to non-affected households

The household effects of mortgage regulation

We evaluate the impact of mortgage regulation on child and parent household balance sheets, highlighting important trade-offs in terms of financial vulnerability. Using Norwegian tax data, we show that loan-to-value caps reduce house purchase probabilities, debt and interest expenses – thereby improving household solvency. Moreover, parents of first-time buyers also reduce their debt uptake, suggesting that concerns about regulatory arbitrage are unwarranted. However, the higher downpayment requirement also leads to a persistent deterioration of household liquidity. We show that this reduction in liquid buffers coincides with larger house sale propensities given unemployment, as households become more vulnerable to adverse income shocks

Boligmarkedet i pandemiåret 2020

Til tross for pandemien var boligprisveksten høy gjennom store deler av 2020. Lavere utlånsrenter, endringer i boligpreferanser og begrenset tilbud av nye boliger har bidratt til økt prispress, især i Oslo. Våre analyser basert på tinglyste boligomsetninger registrert i Kartverket tyder på en vridning i etterspørselen fra større leiligheter til eneboliger etter at strenge smittevernstiltak ble innført i mars 2020. Denne vridningen er særlig synlig i hovedstaden og sammenfaller med sterkere prisvekst i områder rundt Oslo enn i Oslo kommune. Funnene indikerer at koronapandemien kan ha endret folks boligpreferanser noe og gjort det mer attraktivt å bo i større boliger lengre fra sentrum.publishedVersio

Negative Nominal Interest Rates and the Bank Lending Channel

Following the crisis of 2008, several central banks engaged in a new experiment by setting negative policy rates. Using aggregate and bank level data, we document that deposit rates stopped responding to policy rates once they went negative and that bank lending rates in some cases increased rather than decreased in response to policy rate cuts. Based on the empirical evidence, we construct a macro-model with a banking sector that links together policy rates, deposit rates and lending rates. Once the policy rate turns negative, the usual transmission mechanism of monetary policy through the bank sector breaks down. Moreover, because a negative policy rate reduces bank profits, the total effect on aggregate output can be contractionary. A calibration which matches Swedish bank level data suggests that a policy rate of - 0.50 percent increases borrowing rates by 15 basis points and reduces output by 7 basis points

Negative Nominal Interest Rates and the Bank Lending Channel

Following the crisis of 2008, several central banks engaged in a new experiment by setting negative policy rates. Using aggregate and bank level data, we document that deposit rates stopped responding to policy rates once they went negative and that bank lending rates in some cases increased rather than decreased in response to policy rate cuts. Based on the empirical evidence, we construct a macro-model with a banking sector that links together policy rates, deposit rates and lending rates. Once the policy rate turns negative, the usual transmission mechanism of monetary policy through the bank sector breaks down. Moreover, because a negative policy rate reduces bank profits, the total effect on aggregate output can be contractionary. A calibration which matches Swedish bank level data suggests that a policy rate of - 0.50 percent increases borrowing rates by 15 basis points and reduces output by 7 basis points.publishedVersio