Daniel P. Murphy

Category: Urban Economics

  • The Effect of Mortgage Rates on Neighborhood Housing Costs

    with DeShawn Vaughan
    Read

    Abstract

    We estimate zip-level “housing cost sensitivities” (HCS)—the percent change in local home prices or rents per 1% increase in national home prices caused by Ben-David et a. (2024) mortgage-rate shocks. Using Zillow home-value and rent indices for over 13,000 zip codes, we find wide heterogeneity. Across the interquartile range, local home prices rise between 0.3% to 2.0%, while rents range from -1.5% to $1.1%. We find the HCS are strongly regressive: lower-income zips exhibit substantially larger responses for both prices and rents. Zip-level home-price HCS are highly correlated with the city-level inverse supply elasticity of Guren et al. (2021), yet meaningful unexplained variation remains. Beyond supply constraints, we find that demand amplification (natural amenities), land-cost pass-through, and housing-market liquidity all shape HCS. Our results quantify where mortgage-rate movements most strongly transmit into local housing costs and clarify the mechanisms underlying that heterogeneity.

  • Implicit Land Taxes and Their Effect on the Real Economy

    with Nathan Seegert, Journal of Public Economics, Read

    Abstract

    Land taxes are widely viewed as an efficient source of public revenue, yet explicit land taxation is rarely implemented. We study a closely related but largely overlooked object: implicit land taxes that arise within standard property tax systems when tax assessments place different relative weights on land and structures than market valuations do. Using parcel-level data on assessed values and transaction prices from U.S. counties, we estimate these implicit land taxes by comparing assessor and market hedonic valuations. We find substantial dispersion in implicit land taxes across and within metropolitan areas. Counties with higher implicit land taxes experience faster growth in population density, business establishments, earnings, and demographic diversity. These patterns are consistent with theoretical predictions that taxing land more heavily than structures encourages denser and more productive development.

  • Demand Stimulus as Social Policy

    with Alan J. Auerbach and Yuriy Gorodnichenko
    Forthcoming, Review of Economic Studies, Read

    Abstract

    We exploit a panel of city-level data with rich demographic information to estimate the distributional effects of Department of Defense spending and its effects on a range of social outcomes. The income generated by defense spending accrues predominantly to households without a bachelor’s degree. These households as well as Black households tend to disproportionately benefit from this spending. Defense spending also promotes a range of beneficial social outcomes that are often targeted by government programs, including reductions in poverty, divorce rates, disability rates, and mortality rates, as well as increases in homeownership, health insurance rates, and occupational prestige. We compare the effects of defense spending with the effects of general demand shocks and explore reasons for the differential effects of the shocks.

  • Land Taxes: From Theory to Practice

    with Nick B. Allen, John Anderson and Zhou Yang
    National Tax Journal: 77(4), Read

    Abstract

    The interest in land taxes has increased as concerns around revitalization, increased density, and housing affordability have become widespread. This paper provides multiple perspectives that bridge the gap between theory and practice. We offer new insights into questions of where land taxes are likely to be most effective. We also discuss advantages and disadvantages of alternative features including assessment problems, tax incidence, and implementation challenges. Together this paper provides a guide for policy makers and researchers for the future of land taxes.

  • Home Size, Residential Density, and Aggregate Demand

    Read

    Abstract

    This paper documents that smaller homes and denser neighborhoods are associated with higher household saving rates. This relationship is apparent within and across U.S. households, across countries, and over time in the U.S. The micro data indicate the importance of complementarity between housing and non-housing consumption. Incorporating complementarity into a macroeconomic model implies that denser countries with smaller homes have higher household savings rates, a lower natural rate of interest, and lower sensitivity of non-housing consumption to monetary policy. Furthermore, growth in the non-housing sector alongside stable home sizes is associated with a declining natural rate of interest. High density and small homes may contribute to Japan’s lost decade and persistent stagnation.

  • Housing cycles and gentrification

    Journal of Monetary Economics, 144, 103550, Read

    Abstract

    The analysis in this paper documents a high-frequency link between housing markets and downtown gentrification since the mid-1990s. Specifically, property values and the share of formally educated residents increase more in downtown locations than in suburbs during MSA-wide housing market expansions. This relationship holds conditional on changes in MSA-level high-end incomes and is evident at short (three-year) and longer time horizons. I propose a mechanism to account for this evidence based on stronger pass-through from housing market expansions to housing costs for low-income (less formally educated) households. This evidence has implications for the effects of macroeconomic stabilization policies on inequality.

  • Local Fiscal Multipliers and Fiscal Spillovers in the USA

    with Alan Auerbach and Yuriy Gorodnichenko
    IMF Economic Review, 68, 195-229, Read

    Abstract

    We estimate local fiscal multipliers and spillovers for the USA using a rich dataset based on the US Department of Defense contracts and a variety of outcome variables relating to income and employment. We find strong positive spillovers across locations and industries. Both backward linkages and general equilibrium effects (e.g., income multipliers) contribute to the positive spillovers. Geographical spillovers appear to dissipate fairly quickly with distance. Our evidence points to the relevance of Keynesian-type models that feature excess capacity.

  • Home production, expenditure, and economic geography

    Regional Science and Urban Economics, 70, 112-126, Read

    Abstract

    This paper proposes a new microfoundation for the benefits of urban density. Market production of services is efficient because customers effectively share land and other factors of production, leaving them idle for less time. The paper develops a theory in which market-based sharing causes residents of dense areas to purchase services on the market that their suburban counterparts produce at home. The model predicts that residents of dense areas spend more on local services, home produce less, work more, and pay higher land prices – conditional on residents’ productivity and proximity to work. The paper presents evidence that these predictions are consistent with the data.