Mortgage credit expansion policies -such as UK's Help to Buy (HtB) -aim to increase access to and affordability of owner-occupied housing and are widespread around the world. We take advantage of spatial discontinuities in the HtB equity loan scheme, introduced in 2013, to explore the causal economic impacts and the effectiveness of this type of policies. Employing a Difference-in-Discontinuities design, we find that HtB increased house prices by more than the expected present value of the implied interest rate subsidy and had no discernible effect on construction volumes in the Greater London Authority (GLA), where housing supply is subject to severe long-run constraints and housing is already extremely unaffordable. HtB did increase construction numbers without affecting prices near the English/Welsh border, an area with less binding supply constraints and comparably affordable housing. HtB also led to bunching of newly built units below the price threshold, building of smaller new units and an improvement in the financial performance of developers. We conclude that credit expansion policies such as HtB may be ineffective in tightly supply constrained and already unaffordable areas.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact The unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized. Wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed. The unique nondegenerate equilibrium distribution of wage offers is constructed for three cases: (i) identical workers and employers, (ii) identical employers and an atomless distribution of worker supply prices, and (iii) identical workers and an atomless distribution of job productivities.

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Shimer (2005a) argues that the simplest equilibrium search model of unemployment explains less than 10% of the volatility in vacancies, unemployment, and the job-Þnding rate when ßuctuations are driven by productivity shocks. His paper as well as other recent works inspired by it are reviewed and extended here. Although there may be excessive feedback from the job-Þnding rate to the wage built into the model, we argue that he and others overemphasize the need for wage rigidity to explain the data on labormarket ßuctuations. Indeed, the model matches the volatility of the jobÞnding rate if the opportunity cost of continuing a job-worker match is high enough, where this opportunity cost should include both worker's opportunity cost of employment and turnover costs. We also give a simple exposition of Nagypál's (2005) point that an extension of the model that accounts for job-destruction shocks and job-to-job ßows matches the volatility data for * Marcus Hagedorn, Robert Hall, John Kennan, Rasmus Lentz, Iourii Manovskii, Guido Menzio, and Robert Shimer have all provided valuable comments and suggestions.† Financial support from the National Science Foundation is acknowledged.1 reasonable parameter values when hiring costs are taken into account. Furthermore, we show that this extended model is consistent with the quantitative properties of the Beveridge curve in Shimer's data.

Do skill-biased shocks that increase the spread of labour productivities, interacting with different policy regimes, explain the rise in unemployment in Europe relative to the United States in the 1980s and 1990s? The hypothesis is an implication of a version of the Mortensen and Pissarides (1994) model of equilibrium unemployment which allows for worker heterogeneity. A calibrated version of the model implies that a similar unemployment increase would have occurred in the United States over this period, given changes in relative productivity by education implied by observed wage changes, had unemployment compensation and employment protection policies been at European levels.

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