Adam Nowak

SMALL BUSINESS BORROWING AND PEER-TO-PEER LENDING: EVIDENCE FROM LENDING CLUB: LENDING CLUB

This study is interested in the ability of borrowers and lenders to signal to each other in the peer-to-peer lending market. We focus on small business loans and investigate the relationship between the loan description that a borrower provides and the impact of this description on the potential funding of the loan by investors. We find that the loan descriptions in the data can be used to predict the probability that the entire loan will be funded. In addition, we also find that an index created from a textual analysis of the loan description can be used to forecast the performance of the loan; a 1 standard deviation increase in the index will decrease the odds of default by 14%. Thus, it appears as if investors are not making investment decisions based on improper signals.

Strip Clubs, “Secondary Effects” and Residential Property Prices: Strip Clubs and Property Prices

The secondary effects legal doctrine allows municipalities to zone, or otherwise regulate, sexually oriented businesses. Negative secondary effects (economic externalities) justify limiting First Amendment protection of speech conducted inside strip clubs. One example of a secondary effect, cited in no fewer than four United States Supreme Court rulings, is the negative effect of strip clubs on the quality of the surrounding neighborhood. Little empirical evidence that strip clubs do, in fact, have a negative effect on the surrounding neighborhood exists. To the extent that changes in neighborhood quality are reflected by changes in property prices, property prices should decrease when a strip club opens up nearby. We estimate an augmented repeat sales regression model of housing prices to estimate the effect of strip clubs on nearby residential property prices. Using real estate transactions from King County, Washington, we test the hypothesis that strip clubs have a negative effect on surrounding residential property prices. We exploit the unique and unexpected termination of a 17 year moratorium on new strip club openings in order to generate exogenous variation in the operation of strip clubs. We find no statistical evidence that strip clubs have secondary effects on nearby residential property prices.

EXAMINING REGULATORY CAPTURE: EVIDENCE FROM THE NHL

Regulatory capture has garnered significant attention, but poses a difficult empirical exercise since most relationships between regulators and regulated parties occur behind closed doors. In this research, we overcome this problem by analyzing an environment where the behavior of both the regulator and regulated parties are publicly available. Specifically, we utilize data from the National Hockey League (NHL) to examine the impact of general experience as a referee as well as experience refereeing a particular team on the assignation of penalties. We find that gaining general experience as a referee significantly reduces the number of penalties that a referee assigns. However, as a referee gains experience refereeing a specific team, they significantly reduce the number of penalties assessed to this team relative to teams that they have less experience refereeing, confirming that regulatory capture is observed among referees and teams in the NHL. (JEL G18, L51, K42)

Do tourists tip more than local consumers? Evidence of taxi rides in New York City

Given the resurgence of cities as consumer centers and the importance of amenities, we revisit the differences in tipping in taxis between tourists and locals in New York City. Taxi service is an endogenous amenity; however, taxis also contribute to the demand and provision of other amenities. Using data from the New York City Taxi and Limousine Commission, we find that tourists and theatergoers tip more than locals and non-theatergoers, and tourists who are theatergoers tip even more. These differences between tourists and locals may affect the allocation of taxis throughout the city, and hence the provision of other amenities.

Estimating Corporate Tax Avoidance With Accounting-Based Measures

Dyreng et al. (2017) find that the effective tax rates for both foreign and domestic corporations have steadily declined over the past quarter century. However, contrary to conventional wisdom, the authors also find that U.S. multinational corporations do not have a tax-based cost advantage relative to their domestic counterparts. We investigate this unexpected finding by reexamining corporate income taxes over the past quarter century employing an alternative tax avoidance measure developed by Henry and Sansing (2014). The authors measure addresses both sample selection bias and measurement error that exists when using income as the denominator when calculating effective tax rates. Using the Henry and Sansing (2014) measure of tax avoidance, we find that U.S. multinational corporations do have a tax-based cost advantage relative to their domestic counterparts. Thus, sample selection bias is a plausible explanation for the unexpected tax-based cost advantage of US domestic firms reported in prior research.

Cultural Superstitions and Residential Real Estate Prices: Transaction-Level Evidence from the US Housing Market

In Chinese culture, the number 8 is considered lucky and 4 is considered unlucky. We analyze the relationship between the presence of 8s and 4s in addresses and transaction prices paid by Chinese home buyers and sellers in a novel setting, Seattle, Washington, from 1990 to 2015. In the absence of explicit identifiers for Chinese individuals, we develop a probabilistic model for identifying ethnicity based on name alone. The results indicate Chinese buyers pay a 1-2% premium for addresses that include an 8 and 1% less for properties with a 4 in the address. These results are not related to unobserved property quality as there is no premium when Chinese sell properties with an 8 in the address. These results suggest that some Chinese home buyers in Seattle retain their Chinese cultural superstitions.

Strip Clubs, 'Secondary Effects', and Residential Property Prices

The secondary effects legal doctrine allows municipalities to zone, or otherwise regulate, sexually oriented businesses. Negative secondary effects (economic externalities) justify limiting First Amendment protection of speech conducted inside strip clubs. One example of a secondary effect, cited in no fewer than four United States Supreme Court rulings, is the negative effect of strip clubs on the quality of the surrounding neighborhood. Little empirical evidence that strip clubs do, in fact, have a negative effect on the surrounding neighborhood exists. To the extent that changes in neighborhood quality are reflected by changes in property prices, property prices should decrease when a strip club opens up nearby. We estimate an augmented repeat sales regression model of housing prices to estimate the effect of strip clubs on nearby residential property prices. Using real estate transactions from King County, Washington, we test the hypothesis that strip clubs have a negative effect on surrounding residential property prices. We exploit the unique and unexpected termination of a 17 year moratorium on new strip club openings in order to generate exogenous variation in the operation of strip clubs. We find no statistical evidence that strip clubs have secondary effects on nearby residential property prices.