Immigration and housing prices
This Wikipedia entry suggests that illegal immigration is about 700,000 per year, in net terms (1,500,000 gross). I presume this refers to the trend rate before the recession. I also found an article in Yahoo that makes the following estimates:
The study released Wednesday estimates that 11.1 million illegal immigrants lived in the U.S. in 2009. That represents a decrease of roughly 1 million, or 8 percent, from a peak of 12 million in 2007.
The study puts the number of illegal immigrants down to about where it was in 2005. They still make up roughly 4 percent of the U.S. population.
The Homeland Security Department’s own estimate of illegal immigrants is slightly lower, at 10.8 million. The government uses a different census survey that makes some year-to-year comparisons difficult.
Of course these are rough estimates, but let’s say a ballpark estimate is that since 2007 we have been losing about 300,000 illegals per year, instead of gaining 700,000 per year. If so, then it appears population growth in the US might have slowed by about 1 million per year. Births and deaths don’t change much year to year, and I was also unable to find any indication that legal immigration had changed much in the last three years. It turns out the data is collected in a very confusing way, and I wasn’t able to find a reliable Census bureau estimate of the components of population growth. The Census doesn’t show much change in US annual population growth rates, but given they were embarrassed to find 6 million more in the 2000 census than expected, I think it’s fair to say they don’t have a good handle on illegal immigration.
So let’s suppose US population growth fell by one million after 2007, as a result of both the immigration crackdown and the recession. Could this have caused the housing crash? Just to get a rough idea of the magnitudes here, let’s assume a very simple model:
1. Three people per family.
2. Normal population growth 3 million per year.
3. 300,000,000 US residents
4. 100,000,000 US housing units
5. Houses depreciate at 1% per year.
In this model we need a million new houses a year for new population, and another million replacement houses for depreciation. Total construction should be 2,000,000/year, which was roughly the level of the mid-2000s. Now assume population growth falls by 1,000,000. This should reduce steady-state housing construction by 1/6th. Not enough for a housing crash.
If the slowdown was concentrated in illegal immigrant-rich areas with fast population growth (California’s Inland Empire, Arizona, Nevada, etc) it could have had a significant effect on local markets—perhaps two or three times as large as the nationwide effect. That could have triggered a significant housing slump in the sub-prime markets. On the other hand, some immigrants left for reasons other than the immigration crackdown and the resulting drop in housing construction jobs. So there is the issue of disentangling the various shocks. If the immigration crackdown contributed to the decline in housing construction, there would be some sort of multiplier effect, as other immigrants would leave because of the resulting drop in economic activity. But I don’t want to oversell that multiplier, as most of the recession was in non-housing areas.
Let me also emphasize that I am not trying to explain away bubble-like behavior at the micro level. None of this explains banks giving mortgages to low income farm workers so they could buy $500,000 homes, rather I am trying to better understand how at the macro level otherwise intelligent investors might have gotten caught off guard by the nationwide housing slump and fall in real estate prices. One factor propping up prices (rapid immigration) was pulled away unexpectedly. In other parts of the country, the early stages of the housing slump were much less severe.
Now let’s suppose that some combination of less immigration and ordinary post-bubble problems led to severe banking problems for institutions that held lots of MBSs. The Fed mishandles this problem and lets NGDP fall 8% below trend. Now falling NGDP causes housing prices in non-sub-prime areas to begin falling. Ditto for commercial real estate. We saw in an earlier post that it was commercial real estate, not subprime housing, which was the main cause of bank failures.
I actually think immigration was much less than 50% of the initial problem. But even if it was only 20%, because of the various ripple effects that I just described it is not inconceivable that the ultimate effect of the immigration crackdown could have been quite significant. In 2008 there may have been a “knife edge” equilibrium, where if the economy had been a bit stronger we might have avoided the zero rate bound. And if we had avoided that problem, monetary policy might have been able to prevent a steep fall in NGDP. Maybe immigration is one reason Australia avoided the zero bound and steep recession. Still, this is all speculation. Even though I favor a high rate of immigration, the preceding story seems far too speculative to inform our immigration policy. We are better off learning from other countries that do it better than us (yes, I mean Australia and Canada.)
PS: There are lots of guesstimates in this post. My hunch is that immigration slowed, but by less than 1,000,000 per year. But births have also slowed by a few hundred thousand, which I excluded from the estimates. Again, I am not looking for a monocausal explanation of the housing crash. I think it likely that almost all giant economic disasters have multiple causes, whether it be the Great Depression, or the Great Recession.
Tags: Illegal Immigration, Immigration
4. September 2010 at 07:16
Scott,
Below are Census estimates for California and San Diego County (the epicenter of the CA house bubble). These include an estimate of the undocumented alien population. Probably that estimate under-counted illegals; however, on its face, the data does not support the thesis that population growth led to the bubble, as the growth rate declined during bubble years. Instead, the data supports the view that the state and county experienced less net inflow of residents as a result of high housing costs; and that the demand curve shift for housing was a function of low-payment mortgages rather than immigration.
2001 34,507,030 1.5%
2002 34,916,495 1.2%
2003 35,307,398 1.1%
2004 35,629,666 0.9%
2005 35,885,415 0.7%
2006 36,121,296 0.7%
San Diego County:
2000 2,825,395 1.57%
2001 2,869,630 1.25%
2002 2,905,609 0.75%
2003 2,927,311 0.09%
2004 2,930,053 0.06%
2005 2,931,689 0.18%
4. September 2010 at 07:26
Scott,
1. Mortgages cannot cause the bank failures you are talking about – they get bundled and sold off. Bad policy #1. If we’re stuck with FDIC, we should force banks to keep their loans on books – they’d become very conservative and the cost of credit would be higher, lowering home values, and decreasing rents.
2. Construction loans can’t get bundled. That’s the ONLY reason they are closing down banks. If the banks had mortgages on books, you’d be saying “mortgages closed down banks.”
In 2009, bad Construction Loans were like less than half the size of bad CMBS – and CMBS is going better than expected because of almost immediate liquidation.
3. Mortgage loans (easy money and fraud) DROVE construction loans.
I don’t think any of the above can be disputed by you.
Immigrants – we ought a give a green card to anyone who buys a house. Suddenly vacant cities like Detroit have something huge to offer technology companies – import 40K Indians programmers – help each one buy a $20K house.
No, illegal immigrants leaving, or lack of population growth did not cause 20% of housing bust.
Easy Money and Fraud caused 100% of the housing crisis. If we simply required aggressive proof of income and chased down those who were fraudulent – it couldn’t have happened.
4. September 2010 at 07:39
David, I would never claim population growth caused the housing bubble. Prior to 2006 the US population had been growing at a pretty steady 1% for decades.
Population growth probably has slowed sharply in the Southwest, although I haven’t been able to find any reliable data.
My claim was that the sudden slowdown in population growth after 2006 may have depressed property prices, which previously reflected an expectation of continued rapid population growth. I presume the 2000-06 housing bubble was due to other factors, such as the decline in business investment, and laxer lending standards.
I found this in the WSJ:
“According to Frey’s analysis, between July 2008 and July 2009, 27 of the the 52 biggest metro areas saw their suburbs grow slower than in the year-earlier period, and 33 slowed down from the torrid growth in 2004-2005, when the housing boom was in full swing. The slowdown was especially stark in cities hit hardest by the housing bust, including Phoenix, Las Vegas and Orlando.”
4. September 2010 at 07:39
Not to mention that illegal immigration is procyclic. A faltering economy induces illegal immigrants to leave.
4. September 2010 at 07:43
Morgan, You said;
“Mortgages cannot cause the bank failures you are talking about – they get bundled and sold off.”
False, the big banks bought back many of the MBSs, That’s one reason they got in trouble.
You said;
“3. Mortgage loans (easy money and fraud) DROVE construction loans.”
I wouldn’t say there was much fraud in construction loans. They stole from the Treasury, and FDIC, but it was mostly legal. The problem was incompetence at FDIC (perhaps not their fault, I presume Congress instructed them to be lax.)
4. September 2010 at 07:45
Jon, I did mention that, and I mentioned it is actually two issues. How much did it drop off because of the housing construction decline (many illegals build houses.) That’s the multiplier effect. And how much because of unrelated cyclical issues. That’s all discussed in the post.
4. September 2010 at 07:54
This is a fascinating post. I can say this: Many neighborhoods in Los Angeles, once teetering into slumland or worse, have been saved and improved by Hispanic and Asian migrants.
A troubling thought: Evidently, we are not getting as many migrants from mainland China as several years ago (I have a family member who teaches ESL). Perhaps there are more opps there. Again, migrants from the Far East have completely revitalized the San Gabriel Valley area of SoCal.
4. September 2010 at 07:58
Scott, YOUR POINT was the quantity of banks – you linked to a graph showing GA, like it was big news. Nothing you linked to said anything about the actual losses, the actual impact.
MY POINT is that the little pipsqueak banks all over country, SOLD their mortgages, but had to keep their construction loans.
That the BIG banks bought MBS proves my point, the true impact of the the crisis was not the little banks failing because of construction loans. Construction loans are periphery.
Man, I take the time to try and understand your points. Try and do the same.
4. September 2010 at 10:11
Scott,
I’m sure the AZ/NV numbers population growth data would support your case. However, CA is an important exception: there was no post-2006 population growth slowdown there (it had occurred beforehand), so therefore the factor could not have contributed to house price declines in the state. Can a factor have large explanatory power in some states but not others?
4. September 2010 at 10:32
Actually, thinking about NV/AZ, it is unlikely that a slowdown in population growth was much of a factor there. Imagine that most exiting (or not entering) the states, including most illegals, could only afford a home there using a mix of subprime, stated income, interest only and zero-down mortgages. Therefore, once those mortgages were no longer available, those immigrants would not have been able to buy a home. At that point, their presence or absence in the state was immaterial to house prices (but not to rents — that is another story entirely).
4. September 2010 at 10:41
@Dear Pearson
Surely by bidding rents up, they drive richer people towards houses? Or is this substitution up the income scale insignificant?
4. September 2010 at 11:06
Benjamin, I agree, Immigrants have revitalized many neighborhoods.
Morgan. But the big banks did not fail, so I don’t know where you are going with that argument.
David Pearson, I’ll have to take your word on California. I find it odd that illegal immigration could fall by 1,000,000 per year, and not affect California’s population growth rate. Are you sure the data is accurate? Recall that the Census missed the huge illegal flow in the 1990s.
As far as your second point, David beat me to it. More immigration drives up house prices regardless of what type of home they live in.
4. September 2010 at 12:18
Scott,
Let me get this straight: you are arguing this economic meltdown is not because of over-indebtedness (Fisher says it is). No you think we’re going through this because the Fed hasn’t printed enough money.
You said: “That’s right, everything we were told about the financial crisis in 2009 (and which I also believed for a while) is wrong. It’s a commercial RE crisis, not a mortgage crisis. You might argue that it was housing loans that triggered the liquidity crisis of late 2008. Yes, but the crash of late 2008 was caused by the Fed’s failure to do level targeting once rates hit zero. The main public policy issue with bank failures is the cost to taxpayers, not the impact on the business cycle.”
And as such, the BIG BANKS that would have failed if the Fed hadn’t printed TRILLIONS, and Treasury didn’t do TARP… well they are really just fine… because after all they are still open.
And that proves the REAL problem is the little banks sitting on bad construction loans, because THEY are using FDIC funds to cover their depositors.
Does that about describe your argument so far?
If I’m missing anything let me know.
4. September 2010 at 12:30
On this silly illegal immigrants equals 20% of housing boom thing…
It’s dwarfed by the increase in multi-generational households – they are up 4M+ since this started. It is college graduates, but I think it weights more heavily to Hispanic and AfAmerican.
I wont be surprised if it is over 6M+ households through 2011.
We oughta be aiming for 25%+ of households being multi-generational.
4. September 2010 at 13:40
david- I think you actually point an interesting data point on this theory, rent to price ratio. Most of those calling the price rise a bubble were looking at the rise in price to rent ratios, in other words prices were rising much faster than rents. Now one could assume people were expecting future rent increases based on some expected population growth theory, but I don’t find that too persuasive given that there no expectation of a building slowdown in AZ/NV/FL.
My theory has been that housing was merely the symptom of a credit binge that has to be understood as a confluence of the breakdown in Bretton Woods II and overly loose monetary policy in 2003-2005. There was a was of money looking for somewhere to go the innovations in MBS made it look like a great place for it to go, but as a new product investors did not have a full picture of the risks they were taking on and so took too many. There are all sorts of other government and market forces that seemed to funnel the extra credit into housing, but really housing finance was just the weak link.
4. September 2010 at 14:27
This is interesting stuff but there needs to be more info regarding migrations of citizens and non-citizens. Home prices have remained comparatively steady in Texas for example, at least in part due to population growth being the most upward in the country. It seems that, and I suppose we will know more when the census is completed, that a significant relocation is underway in the Southwest as folks leave Nev., Ariz., and parts of Calif., and move to where there are more jobs. It seems that the population surge that was occurring in Las Vegas, Phoenix, and San Diego, has shifted to San Antonio, Austin, and the areas between those two cities.
4. September 2010 at 15:44
At least the Brits are clear (at the end of this article). The whole purpose of QE is to raise interest rates – not to lower them. Tell this to the WSJ morons.
http://www.economicsuk.com/blog/001225.html
4. September 2010 at 15:49
How about legal immigrants (like my parents)? How come this subject never comes up?
4. September 2010 at 17:39
Scott,
It may be that construction of the CA/Mex border fence had already diverted a good deal of illegal immigration, and drug contraband, to AZ and TX. In fact this at least partly explains why Arizonan’s are so worked up about the issue. I believe Congress only initially appropriated enough funds for the CA section and didn’t renew appropriations for later construction. This is why McCain, in a well known about face, recently made a political ad where he said, “let’s just complete the danged fence!” just three years after having opposed the idea.
So yes, I believe the census has CA and SD County right in that population growth slowed earlier in the decade. This was also apparent in that new home construction did not boom there except for a few faster-growing counties (notably, Riverside, San Bernadino and Placer).
As for the point on immigrants and house prices, I would say that when mortgage underwriting standards rose, they fell out of the population of potential house buyers entirely (not that they were forced into cheaper homes). The rent equation is highly complex, with foreclosures adding to rent demand AND supply, even while unemployment and less net migration reduces demand. It is difficult to make the argument that immigrants forced to rent would put upward pressure on house prices as they added to rent demand, especially since rents have diverged from house prices for quite long periods of time.
In short, at least in CA, a reduction in net total (legal and non) migration occurred at the same time as the housing bubble, not after.
An excerpt from an SF Chronicle article on the issue:
A state-of-the-art fence constructed on almost 10 miles of border in western San Diego County has reduced the number of Border Patrol arrests of illegal entrants there, the research service reported.
But “the flow of illegal immigration has adapted to this enforcement posture and has shifted to the more remote areas of the Arizona desert,” the research service said. The number of arrests along the entire border in 2004 was 1.2 million, the same as in 1992, before the San Diego fence was built and other enforcement was increased.
“The main difference is that, while San Diego accounted for the majority of apprehensions in 1992, in 2004 (the) Tucson and Yuma sectors accounted for the majority of apprehensions,” the study noted.
4. September 2010 at 18:17
At the height of the housing boom, there was a strong (very strong .8) correlation between housing affordability (measured by the ratio of median household income to median house price) and the proportion of the residents who were foreign born. My take on that is that the foreign born cover the pool of non-citizen residents. Cities with lots of non-citizen residents mean that entrants to the housing market are disproportionately cut out of the political process, so the normal tendency of regulation to protect incumbents (in this case, owners of existing housing land) will be greatly increased.
Add to the fact that coastal cities tend to have strong positional goods (harbour views, hill top views etc) and the tendency to restrictive land use controls is increased on top of the aforementioned increased tendency to incumbent-protecting regulation. Hence the Zoned Zone versus Flatland, in Krugman’s useful and evocative terms.
So, I think there is a connection between immigration and housing bubbles, but not quite what one would think. (There was, for example, no correlation between population growth and housing affordability.) So, to say More immigration drives up house prices regardless of what type of home they live in. is only true if supply is constrained from responding to demand. Texas has high population growth and no significant bubble in prices.
I would also point out that while Australia is good at dealing with immigrants (as a share of population we have far more than the US, 23% to 10%) but not when it comes to housing prices, where we have adopted the British/Californian control model not the German/Texas let-supply-respond-to-demand model. We are Zoned Zone, not Flatland.
4. September 2010 at 19:02
Scott,
If enough of us contact CNBC to get you on, are you willing to say that immigrant-bashing caused the financial crisis?
It will really help if you get heated during the discussion, shouting over Larry Kudlow. End it by calling him a racist liquidationist.
4. September 2010 at 21:30
Another Scott Sumner fan:
http://macromarketmusings.blogspot.com/2010/09/all-i-want-for-christmas-is.html
Growth Hawks must become more active–do not let the Japan Wing of the Fed rule the day.
Send this message out: Japan has experimented with tight money for 20 years. It has zero inflation. It has a strong yen. It has also had a GDP growth rate of 0.8 percent (less than France!) in those 20 years, and equity and property markets that have tumbled by 75 percent.
What a great future for America, now that we can have zero inflation too! Thanks central bankers–as long as we accomplish the important stuff, like zero inflation.
Repeat these themes every chance you get.
4. September 2010 at 22:46
You’ve got the causation backwards.
Illegals built my house during the housing boom.
In 2009 I counted over 100 illegal day laborers looking for work at a Home Depot.
Unemployment among illegals in the construction industry in California has got to be over 50% — and the constructipn industry was a major emploer of illegals.
4. September 2010 at 22:52
If you want to learn about the relation between immigration and the mortgage / housing noom & bust, few have looked at more of the specifics than has Steve Sailer. Bush essentially bankrupted a non trivial portion of the hispanic population with his race based government mortgage lending initiatives.
The Orange County Register has also covered the story of hispanic neighorhoods and the housing boom and bust.
4. September 2010 at 23:01
An illegal I talked with in late 2008 said at that time he knew folks who’d just recently gone back to Mexico because of the difficulty finding steady work in America — and others who were considering it.
Note this was already more than two years into the crash in home starts in California.
4. September 2010 at 23:03
It would be nice if economists actuslly did field work.
As if they were real scientists like, say, biologists or geologists or oceanographers, etc., etc. all of who actually, you know, do field research.
5. September 2010 at 04:55
Scott, I just thought of another issue:
“Yes, but the crash of late 2008 was caused by the Fed’s failure to do level targeting once rates hit zero.”
You say this all the time. But if Fed policy becomes target 3% NGDP, than ANYTIME growth is coming up short – the Fed is forced to drop rates back to ZERO.
Because if they do not drop rates to zero, they have to do QE instead, and the inflation hawks at the Fed won’t do QE until rates go to zero.
Amd then there’s always the other side: If the Fed knew QE was required once rates hit zero, they’d be less likely to let them hit zero.
5. September 2010 at 06:47
Morgan, You said;
“We oughta be aiming for 25%+ of households being multi-generational.”
You think the Fed should abandon interest rate targeting, and start targeting the number of households that take in granny?
OGT, I agree that our housing finance system was a much bigger problem than the immigration crackdown.
rayllove, I was a big fan of the Texas model even before the crash. One big factor is liberal land use regulations–which prevented a big price run-up before 2006 (as other states had seen). You are right that the job factor is also important in Texas, and that’s due to their relatively sound economic model.
JimP, That’s a very interesting article
Mark, I wasn’t able to find any good data on legal immigrants. You’d think it was easy to find, but it isn’t. Instead the data shows how many became citizens, or got green cards, a completely different concept.
David Pearson, You said;
“It is difficult to make the argument that immigrants forced to rent would put upward pressure on house prices as they added to rent demand, especially since rents have diverged from house prices for quite long periods of time.”
It’s not difficult at all, it is standard economic theory–right out of econ 101. Homes can be rented or sold. The two are close substitutes.
How do you know that people didn’t cross over from Mexico into Arizona, and then on into California?
I do agree with one part of your comment, the main impact of immigrants was in inland areas of California, which is where the sub-prime bubble was at its worst.
Lorenzo, I entirely agree with everything you say, and I would note that Texas did not have the housing problems that other areas had. Even Vegas and Phoenix saw land prices rise sharply due to tight land use regulations.
Mike Sandifer, There’s nothing I’d like less than to get into a shouting match on TV. In any case, I think immigration was only one factor in the crisis, there were many others.
Thanks Benjamin, That was nice of David.
Greg, Read my post again, I discussed how reverse causation fed into a sort of immigrant “multiplier.”
Greg, Steve left some comments here once, but all he seemed to have was anecdotal data. What is the percentage of all housing foreclosures that are hispanic?
Also he suggested the government forced banks to make these bad loans, which is very misleading. Many big banks voluntarily bought junk MBSs in the secondary market. The government gave them no brownie points for doing so. The simplest answer is that banks were stupid.
Greg, You said;
“It would be nice if economists actuslly did field work.”
And it would be nice if commenters actually read posts before accusing me of not knowing that many immigrants returned due to a weak economy.
Morgan, You said;
“You say this all the time. But if Fed policy becomes target 3% NGDP, than ANYTIME growth is coming up short – the Fed is forced to drop rates back to ZERO.”
Actually I favor 5% NGDP growth. And second, your comment makes no sense. Why would you argue that zero rates are needed anytime growth slows?
5. September 2010 at 06:52
Scott,
I was kidding about you shouting on CNBC.
5. September 2010 at 07:50
Scott,
I’m perfectly willing to accept that rental and purchase homes are close substitutes, if you can account for lasting, severe deviations in the mean price/rent ratio that are not explainable by changes in real long-term interest rates.
In other words, Econ 101 says net immigration has an impact on total housing demand and therefore house prices. It does not say that the impact is material compared to other factors at work.
5. September 2010 at 08:31
BTW–I realize the price/rent ratio is driven by future real rental growth expectations as well. However, I don’t think many were justifying bubble house prices on the basis of extrapolations of meager rental income growth.
5. September 2010 at 10:22
Scott, sorry if I misled. This a observation about the current practices of your profession, one which I’ve made repeatedly elsewhere.
As much as anything I was regretting is that you sort of have to invent this stuff on the back of an envelope, when a team of field researchers from a healthy science of economics could have a mountain of specifics on all this, with a full survey of what happened in EVERY instance, no need from cranking on the old computer to come up with estimates and estimates of the reliability of estimates.
In part I was also lamenting the fact that bloggers have been more serious about getting many of the facts of interest here than has economics as a profession — as indicated by the fact that economics does not support field research as part of its image of “real science”, despite the fact that this is exactly what many of the best real sciences actual do.
I’m interested in the pathologies of economics as a failed science (and what could return it to health) more than anything.
I was identifying one of those pathologies.
Scott wrote,
“Greg, You said;
“It would be nice if economists actuslly did field work.”
And it would be nice if commenters actually read posts before accusing me of not knowing that many immigrants returned due to a weak economy.”
5. September 2010 at 10:26
Sailer has tried to get some actual numbers on the minority percentages involved in the whole mortgage boom and bust episode.
Almost no one else has tried. And it turns out it is not easy.
5. September 2010 at 10:44
Scott,
Being a numbers fiend I know from past experience that the Center for Immigration Studies (CIS), despite its somewhat leftward ideological slant, is a often good source for general immigration data. But I have to admit I have neither the time nor the inclination to research the issue further just now.
5. September 2010 at 21:45
Different US metro areas have experienced very different patterns of migration, as discussed here. Generally, high housing price metropolises have continued to attract foreign migration, but are losing domestic migrants.
The US generally seems to have “gone off the boil” a bit as a migration destination, with the proportion of foreign born falling slightly for the first time in many years.
6. September 2010 at 08:41
MikeSandifer, Yeah, I suppose I knew that. I get in the habit of taking comments too seriously. I need to lighten up.
David Pearson, I admit that I don’t have a good explanation for rent/price differences. I suppose that part of the bubble is related to laxer lender standards, or consumer optimism about home price increases. So I agree that immigration can’t be the whole story.
Greg, You said;
“As much as anything I was regretting is that you sort of have to invent this stuff on the back of an envelope, when a team of field researchers from a healthy science of economics could have a mountain of specifics on all this, with a full survey of what happened in EVERY instance, no need from cranking on the old computer to come up with estimates and estimates of the reliability of estimates.”
It’s not as clear as you imply that this will work. Lots of studies have been done of wage and price stickiness, and they haven’t really resolved which theory of wage and price stickiness is right. But I agree that more information is better. But because things like immigration have their most powerful effects through expectations, it can be hard to measure the effect with fieldwork.
Mark, Here’s my conceptual question. A student comes here on an educational visa. Then after grad school starts working for one year on a temporary visa, then works two years on a green card, then becomes a citizen. At what point do they immigrate? I doubt whether I would find the government definition satisfactory, in terms of economic impact.
Lorenzo, That piece is full of useful information. The declines are real, and occurred primarily in 4 states, Cal, Nev, Ari. and Florida. 1/3 of foreclosures were hispanics in those 4 states (which is close to their share of the population in those states.) Barone doesn’t expect immigration to pick up after the recession, but cites not just the crackdown, but also demographics in Latin America.
It’s interesting how many slow growth trends have fallen in place in recent years:
1. From the right: a cry to crack down on immigration.
2. From the left: Moving closer to the Euro-big government model, with national health care, higher taxes and minimum wages, 99 week unemployment.
And in the midst of it all, tight money that slows down NGDP growth.
I’ve always suspected that real and nominal shocks were entangled. That interest rate targeting made it more likely that an adverse real shock (which lowered the equilibrium real interest rate) would lead to an adverse nominal shock.
9. September 2010 at 08:23
Scott, we are not testing a highly theoretical theory here.
We are looking at blunt stuff, with a near full survey of endless specifics possible.
A small part of the problem is that the government doesn’t want ethnic and nationality data of this kind to be collected or put into publicly available form — its not an accident that this sort of thing has to be guessed or “estimated”.
But the bigger problem is the incentive structure of the economics profession — and its bogus understanding of the nature of science.
Scott wrote,
“It’s not as clear as you imply that this will work. Lots of studies have been done of wage and price stickiness, and they haven’t really resolved which theory of wage and price stickiness is right.”
9. September 2010 at 08:28
A full survey of multi-dimensional facts about the complete population of those who have been foreclosed upon or who have given up their homes in a short sale, or who are upside down on their loans is possible.
But economists do statistical “science” on their laptop, they don’t do field research.
We rely upon reporters at the OC Register — and bloggers like Calculated Risk — for information from the field.
10. September 2010 at 13:32
Greg, I have no idea how ethnicity could possibly relate to wage and price stickiness. It is a problem in all countries regardless of ethnicity. So your response seems a non-sequitor.
11. September 2010 at 21:45
Scott, I must have been unclear.
I wasn’t talking about wage and price stickiness.
The topic was housing.
Scott wrote,
“Greg, I have no idea how ethnicity could possibly relate to wage and price stickiness. It is a problem in all countries regardless of ethnicity. So your response seems a non-sequitor.”
12. September 2010 at 06:13
Greg, My mistake, I was looking at the comment of mine you quoted, I see know that this wa sjust an analogy.
I still think it’s hard to answer deep macro questions with field experiments.