Working papers

Why Women Earn Lower Real Estate Returns (with Laurent Bach and Paolo Sodini)

Using repeat-sales data on apartments in Sweden, we estimate the gender gap in housing returns. We confirm that single women’s returns gross of renovations are lower than single men’s by more than 2%, that half of this gap is due to market timing, and that the gender gap is concentrated in short holding period. Adding administrative data on renovation expenses and traders’ background, we find that women are much less likely to specialize in real estate professional activities and undertake renovations. Professional transactions have short holding periods and account for 25% of all transactions, even though they represent only 10% of the housing stock. Among sellers who are not real estate professionals, the gender gap shrinks to 0.3%, and it fully disappears once renovations are accounted for. We find no evidence supporting the alternative explanation that women are unwilling to bargain hard for housing.

Wealth, savings, and returns over the life cycle: the role of education

This paper studies the effect of education on wealth and wealth accumulation over the life cycle. The analysis relies on an administrative panel that reports educational attainment and detailed information on assets and liabilities of Swedish residents. To identify the causal effect of education, I employ three alternative identification strategies which rely on controlling for predetermined family background and ability, within-siblings variation in educational attainment, and a compulsory schooling reform. I find that education has a positive, large, and long-lasting effect on net worth. I further show that it affects all balance sheet components and that these effects vary over the life cycle. Finally, I document that the differences in wealth are driven by both higher savings and higher portfolio returns among the more educated, although their relative importance varies over time. My results have implications for theoretical work on optimal consumption-saving behavior and portfolio choice, as well as for fiscal and social security policy. Overall, the findings suggest that considering only wage returns to education greatly understates its economic implications.

Peer effects in stock market participation: Evidence from immigration (with Thomas Y. Mathä and Michael Ziegelmeyer) R&R ROIW

This paper studies how peers’ financial behaviour affects individuals’ own investment choices. To identify the peer effect, we exploit the unique composition of the Luxembourg population and use the differences in stock market participation across various immigrant groups to study how they affect the participation decisions of natives. We solve the reflection problem by instrumenting immigrants’ stock market participation with lagged participation rates in their countries of birth. We separate the peer effect from the contextual and correlated effects by controlling for neighbourhood and individual characteristics. We find that stock market participation of immigrant peers has sizeable effects on that of natives. We also provide evidence that social learning is one of the channels through which the peer effect is transmitted. However, social learning alone does not account for the entire effect and we conclude that social utility might also play an important role in peer effects transmission.

Implications of Fiscal Policy for Housing Tenure Decisions

Many of the world’s wealthy countries provide fiscal incentives to homeowners. Yet, the impact of such tax breaks on housing tenure decision is unclear. Using difference-in-differences approach, this study estimates the effect of mortgage interest deduction on home ownership in the United States. The identification relies on the large changes in income tax rates and standard deduction. The largest of these changes increased income tax rate by as much as 23,9% and decreased standard deduction by 7,2% between 2002 and 2004. The baseline estimates suggest that increase in income tax rate in a state that allows mortgage interest deduction is associated to 3 percentage points increase in home ownership relative to states that didn’t change their fiscal policy and to 5 percentage points – relative to states that do not allow mortgage interest deduction but had a comparable increase in tax rates. The results are robust to a range of alternative specifications.

Gender Differences in Wealth and the Role of Financial Literacy

This paper seeks to understand how differences in financial literacy between women and men are related to the differences in their financial wealth. By using Dutch Central Bank Household Survey, this study shows that women are, on average, less knowledgeable about basic financial concepts and that households whose financial decisions are taken by women tend to have less financial wealth. The results of the decomposition of the gender wealth differential suggest that between 20% and 50% of the difference in financial wealth can be accounted for by differences in financial literacy and that its role is higher for lower levels of wealth.

Ongoing research projects

Intermediation in Household Finance: Competition and Welfare (with Paolo Sodini and Jan Starmans)
Herding in Financial Markets (with Alexander Ljungqvist and Paolo Sodini)

Policy work

Wealth and Gender in Europe: Report for the European Commission Directorate-General for Justice and Consumers (with Eva Sierminska)
In media: Luxemburger Wort
The Luxembourg Household Finance Consumption Survey: Results From the 2nd Wave (with Thomas Y. Mathä and Michael Ziegelmeyer)