LEMONS WITH A TWIST: ADVERSE SELECTION AND THE ROLE OF SECURITIZATION IN MORTGAGE MARKET EVOLUTION

We experimentally varied information mailed to 87,000 households in California’s health insurance marketplace to study the role of frictions in insurance take-up. Reminders about the enrollment deadline raised enrollment by 1.3 pp (16 percent) in this typically low take-up population. Heterogeneous effects of personalized subsidy information indicate misperceptions about program benefits. Consistent with an adverse selection model with frictional enrollment costs, the intervention lowered average spending risk by 5.1 percent, implying that marginal respondents were 37 percent less costly than inframarginal consumers. We observe the largest positive selection among low income consumers, who exhibit the largest frictions in enrollment. Finally, we estimate the implied value of the letter intervention to be $25 to $53 per month in subsidy dollars. These results suggest that frictions may partially explain low take-up for marketplace insurance, and that interventions reducing them can improve enrollment and market risk in exchanges. (JEL C93, G22, G52, H75, I13)

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The Role of Government and Private Institutions in Credit Cycles in the U.S. Mortgage Market

10.3386/w27499 ◽

2020 ◽

Author(s):

Manuel Adelino ◽

William McCartney ◽

Antoinette Schoar

Keyword(s):

Mortgage Market ◽

Private Institutions ◽

Role Of Government ◽

Credit Cycles ◽

The U.S

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Refinancing, Monetary Policy, and the Credit Cycle

Annual Review of Financial Economics ◽

10.1146/annurev-financial-012720-120430 ◽

2020 ◽

Vol 12 (1) ◽

pp. 67-93 ◽

Cited By ~ 1

Author(s):

Gene Amromin ◽

Neil Bhutta ◽

Benjamin J. Keys

Keyword(s):

Monetary Policy ◽

Policy Implementation ◽

Lessons Learned ◽

Mortgage Market ◽

Transmission Mechanism ◽

Mortgage Markets ◽

Policy Transmission ◽

The Usa ◽

Credit Cycle

We assess the complicated reality of monetary policy transmission through mortgage markets by synthesizing the existing literature on the role of refinancing in policy implementation. After briefly reviewing mortgage market institutions in the USA and documenting refinance activity over time, we summarize the links between refinancing and consumption and describe the frictions impeding the refinancing channel. The review draws heavily on research emerging from the experience of the financial crisis of 2008–2009, as it highlights a combination of market, institutional, and policy-making factors that dulled the transmission mechanism. We conclude with a discussion of potential mortgage market innovations and the applicability of lessons learned to the ongoing stresses induced by the COVID-19 pandemic.

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