Working Paper: NBER ID: w0447
Authors: Patric H. Hendershott
Abstract: This paper presents calculations of the impacts of two levels of mortgage revenue bonds (MRBs) on: (1) yields on home mortgages, tax-exempt bonds and taxable bonds, (2) the allocation of the American fixed capital stock among residential (by three tax brackets), business, and state and local capital, (3) the productivity of this aggregate stock, and (4) the federal deficit. The levels of MRBs analyzed are $40 billion and the maxi-mum permitted by the realities of the market place. The latter is estimated to be $440 billion or over half of regular home mortgages outstanding. Limited levels of MRBs directed solely at "lower" income housing would not have any clear impact on productivity. An unlimited volume would generate an estimated annual productivity loss of $3 billion. Assuming a 4 percent discount rate, the present value of this stream is $75 billion.
Keywords: mortgage revenue bonds; tax exemption; federal deficit; capital allocation; productivity
JEL Codes: H24; H71; R38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mortgage revenue bonds (MRBs) (H74) | productivity (O49) |
| unlimited mortgage revenue bonds (MRBs) (H74) | productivity loss (D24) |
| increased mortgage revenue bonds (MRBs) (H74) | substitution of less productive housing for more productive business capital (R38) |
| substitution of tax-exempt for taxable financing (H20) | lower federal tax revenues (H29) |
| increased mortgage revenue bonds (MRBs) (H74) | decline in demand for state and local capital (H79) |
| increased mortgage revenue bonds (MRBs) (H74) | productivity of fixed capital stock (E23) |