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Research Seminars & Workshops @ IRES


Assistant Professor Johannes Stroebel
Leonard N. Stern School of Business,
New York University

House Prices, Local Demand, and Retail Prices


Date:

12 Mar 2015 (Thu)

Time:

3.00 - 4.30pm

Venue:

RMI Executive Seminar Room 21 Heng Mui Keng Terrace, I3 Building, Level 4


Abstract

We use detailed micro data to document a causal response of local retail prices to changes in house prices, with elasticities of 15%-20% across housing booms and busts. We provide evidence that our results are driven by changes in markups rather than by changes in local costs. We argue that this markup variation arises when increases in housing wealth reduce households' demand elasticity, and firms raise markups in response. Consistent with this wealth channel, price effects are larger in zip codes with many homeowners, and non-existent in zip codes with mostly renters. In addition, shopping data confirms that house price changes have opposite effects on the price sensitivity of homeowners and renters. Our evidence has implications for monetary, labor and urban economics, and suggests a new source of markup variation in business cycle models.

About the Speaker

Johannes Stroebel joined New York University Stern School of Business as an Assistant Professor of Finance in July 2013. Professor Stroebel conducts research in finance, macroeconomics and real estate economics. His recent research focuses on the residential housing market and consumer credit markets, with a focus on understanding the role of asymmetric information in determining market outcomes. He has also analyzed the impact of government interventions in the housing market through the fiscal code, and has evaluated government responses to the recent financial and housing crisis.

Prior to joining Stern, Professor Stroebel was the Neubauer Family Assistant Professor of Economics at the University of Chicago Booth School of Business. In the past he has worked for Deutsche Bank and Merck KGaA. He is a member of the Working Group on Economic Policy at the Hoover Institution.

Professor Stroebel read Philosophy, Politics and Economics at Merton College, Oxford, where he won the Hicks and Webb Medley Prize for the best performance in Economics. He earned a Ph.D. in Economics at Stanford University, where he held the Bradley and Kohlhagen Fellowships at the Stanford Institute for Economic Policy Research.

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