Matthew Winter, a research professor in the School of Business at Stony Brook University, will present his paper, “Black Tax: Evidence of Racial Discrimination in Municipal Borrowing Costs,” at the Brookings Institute 2022 Municipal Finance Conference, held online July 18-20. Did.
The paper, co-authored by Ashley Eldemia Poindexter of the University of Tennessee and Kimberly Luchtenberg of the American University, finds that municipalities with a high percentage of black residents outperform other cities and counties that publish within the same neighborhood. It indicates paying a high borrowing cost to issue a fixed bond. state and year. These higher costs cannot be explained by credit risk, are more pronounced in states with higher levels of racial resentment, and are stronger in state tax incentives to hold municipal bonds.
In time series tests using political election periods, where racial resentment has been shown to intensify, the study found that borrowing cost differences also increase. Taken together, the findings show that racial prejudice can increase borrowing costs, especially when racial resentment is severe.
The Brookings Conference, considered the premier municipal finance conference in the field, is highly selective and attended by academics, policy makers and market participants.
Winter also accepted another paper on minority and low-income homeownership for the Review of Corporate Finance Studies. “Does homeownership reduce the wealth gap between low-income and minority households?” uses limited data from the U.S. Department of Housing and Urban Development’s (HUD) Housing Choice Voucher (HCV) program to I study the wealth effects of home ownership for low-income households.
This paper examines whether becoming a homeowner has differential effects on wealth for low-income white and minority households. HUD’s HCV program provides housing subsidies for rent and mortgage payments to low-income families. To identify whether homeownership affects wealth, this paper compares household wealth as renters with wealth as homeowners and uses the variation in wealth outcomes between households to Measures the impact of home ownership on racial disparities in wealth. Using this difference-of-differences approach, the study controls for the many unobservable and confounding differences within households that are likely to affect wealth accumulation, while at the same time showing that wealth outcomes vary by race. Make it possible to be different.
Using this empirical approach, the paper establishes that low-income households who receive help in owning a home have increased wealth compared to their tenure as renters. However, these wealth gains are not seen among low-income minority households. The findings provide evidence that homeownership is a driver of wealth formation for low-income households and that homeownership does not inherently reduce racial disparities in wealth.
Winter’s research focuses on behavioral finance and international finance. His research has been presented at financial and economic conferences around the world, including the Brookings Institution, the American Economic Association, and the China International Financial Conference. His research has been published in the Review of Corporate Finance Studies, World Economy, and Journal of Management, Policy, and Practice.