Daniel P. Murphy

Category: Working Papers

  • Work From Home and the Post-COVID Spending Surge

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    Abstract

    U.S. personal saving rates have remained below pre-pandemic levels. This paper links the sustained increase in consumption to the rise of working from home (WFH). Using PSID 2019–2023 data and an industry-based instrument for WFH, I find that households induced to WFH raised expenditure by more than \$7,000 on average, holding income and wealth constant. Spending rose not only among movers but also among non-movers, consistent with a persistent shift in preferences toward housing-complementary consumption. The estimates imply that WFH reduced the aggregate saving rate by 1.2 percentage points, and they suggest that remote work structurally increased demand for housing-related consumption, contributing to the post-pandemic spending boom.

  • The Heterogeneous Reactions of Household Debt to Income Shocks

    with Nikolaos Koutinidis and Elena Loutskina
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    Abstract

    We study how household debt portfolios-aggregated at the ZIP code level-respond to local income shocks in the United States. We implement two separate identification strategies: (i) a Bartik-style instrument that shifts local earnings via national industry trends, and (ii) a novel instrument utilizing the timing and location of shale oil and gas well discoveries. Across both designs, positive income shocks are, on average, associated with deleveraging. This average, however, masks a sharp bifurcation in financial behavior. Deleveraging in total credit is driven by financially healthier households-those with higher credit scores, higher incomes, or lower leverage-who restrain the growth of credit-card and auto debt. In contrast, financially vulnerable households often treat the windfall as a gateway to new auto credit while still deleveraging credit-card and typically mortgage debt. Looking at mixed-profile households, we find strong mortgage leveraging among households with high income and high debt or low credit scores. These results show that the same income shock can trigger balance-sheet repair for some households and additional leverage for others-varying by both borrower type and debt category-underscoring substantial underlying heterogeneity and highlighting barriers to broad-based financial stability.

  • Home Size, Residential Density, and Aggregate Demand

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    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.

  • Implicit Land Taxes and Their Effect on the Real Economy

    with Nathan Seegert, Revise and Resubmit, Journal of Public Economics, Read

    Abstract

    We show empirically that land taxes are associated with higher density, neighborhood diversity, business formation, and other indicators of economic performance. To investigate land taxes empirically, we estimate implicit land taxes (or subsidies) for over 2,000 counties in the U.S. These implicit land taxes arise due to idiosyncratic discrepancies in the evaluation of land and structures between tax assessors and buyers and sellers in the market.  We find substantial dispersion in implicit land taxes across U.S. counties and within metropolitan areas. They are also highly persistent within counties. Finally, we develop a model of land taxes and endogenous population to rationalize our results.