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Maxwell School
Maxwell / Center for Policy Research

 Jan Ondrich, Professor of Economics

Selected Papers

Do Minority and Woman Entrepreneurs Face Discrimination in Credit Markets?  Improved Estimates Using Matching Methods, Working Paper. 
Yue Hu, Long Liu, Jan Ondrich, and John Yinger

Abstract
This paper uses propensity score matching methods to address an unrecognized methodological challenge in estimating discrimination in small business credit markets. The matching methods relax the functional form assumptions implicit in regression-based estimates. We analyze interest rates paid on approved loans pooling 1993, 1998 and 2003 waves of the Survey of Small Businesses Finances. Our findings indicate that, on average, Black and Hispanic-owned firms pay an interest rate that is, respectively, 0.791 and 0.486 percentage point higher than the rate paid by White-owned firms. We find no evidence of discrimination against White women in small businesses loans.  

  • How Sensitive is Foreign Direct Investment in China to Wage Differences? Skill Intensity, Product Market Competition, and Networks, Working Paper. 

    Xuepeng Liu, Mary Lovely, and Jan Ondrich

    Abstract

    Deeper international integration through an inflow of foreign direct investment alters domestic labor markets, whether by shifting the labor demand curve or by increasing the elasticity of demand for domestic workers.  This paper uses the location choices of multinational firms investing in China as a window into the relationship between foreign investment and host-country labor demand.  With data on 2884 manufacturing equity joint venture projects in China during 1993-1996, we investigate the extent to which an investor’s sensitivity to wages depends on the skill intensity of the activity, product market competition, and source country development level.  Applying conditional logit techniques developed in a series of papers by Petrin and Train (2005, 2006), we find a significant, elastic response of capital to wages; ceteris paribus, investors are attracted to locations with low wages. Moreover, investors involved in the least skill intensive activities exhibit the most wage sensitivity.  Using the Broda-Weinstein (2006) U.S. import demand elasticity estimates for Chinese exports to measure pass-through ability, we find that investors in those industries where China faces the most elastic import demand are the most sensitive to wages differences, even when we control for the skill-intensity of the manufacturing activity. We also find that while OECD investors are more responsive to wage differences overall, they are less likely to choose a location that has received a large share of prior foreign investment.  Simulations of regional wage subsidies indicate that policies to shift investment to inland regions alter the composition as well as the location of investment.

     

  • Cox-McFadden Semiparametric Estimation for a Class of  Clustered Proportional Hazards, Working Paper.  

    Jan Ondrich

    Abstract

    My paper examines the problem of constructing partial and marginal likelihood approaches to estimating proportional hazards for clustered observations. It turns out that the problem is isomorphic to the problem of relaxing the assumption of independent errors in an extreme-value stochastic utility model. McFadden (D. McFadden 1978, “Modelling the Choice of Residential Location.” Paper No. 25 In Spatial Interaction Theory and Planning Models, edited by Anders Karlqvist, Lars Lundqvist, Folke Snickars, and Jörgen W. Weibull. Amsterdam: North Holland, 75-96) characterizes all discrete choice probability models with univariate extreme value disturbances that are consistent with stochastic utility maximization. He then gives sufficient conditions for the copula to be consistent with stochastic utility maximization. The sufficient conditions describe the set of GEV models. My paper shows that the duration baseline is eliminated from the partial likelihood for clustered proportional hazards when the probability that the first failure is the first observed failure can be modeled as a GEV probability.

     

     

  • The Location Decisions of Foreign Investors in China: Untangling the Effect of Wages Using a Control Function Approach.” 2010. Review of Economics and Statistics 92(1):160-166.

    Xuepeng Liu, Mary Lovely, and Jan Ondrich

    Abstract

    Although studies of aggregate investment flows provide consistent evidence that capital is attracted to low wages, there is almost no empirical support for this proposition from plant-level location choice studies. We examine the provincial location choices of firms investing in China during 1993-1996 to offer two main contributions. First, using data on 2884 manufacturing equity joint venture (EJV) projects, we investigate the extent to which standard estimation suffers from omitted variable bias. Applying a two-step technique, developed by Petrin and Train (2005a, b), to conditional logit analysis, we find a significant, elastic response of capital to low wages. Our estimates indicate a downward bias of more than 100 percent in the wage coefficients estimated with standard techniques. Second, we find that low-wage locations are more attractive to unskilled-labor-intensive plants than to skill-intensive plants, regardless of the investment source. The attraction of low wages for investors from Hong Kong, Macao, and Taiwan, who are most likely to use China as an export platform, also is sensitive to the intensity of competition from other low-income countries in the U.S. market.

      

  • Changes in Rental Housing Discrimination since 1989. 2008. Cityscape 10(2):301-330.

    Seok Joon Choi, Jan Ondrich, and John Yinger

    Abstract

    This study examines the incidence and causes of housing discrimination in qualitative treatment by rental agents, using national audit data sets from the 2000 Housing Discrim­ination Study (HDS 2000) and the 1989 Housing Discrimination Study (HDS 1989). Using the fixed-effects logit method described by Chamberlain (1980), we control for unobservable factors shared by audit teammates and conduct hypothesis tests for the incidence and causes of discrimination. We find evidence that discrimination is present in HDS 2000 and is caused by both the prejudice of agents and their response to the prejudice of White clients. We also explore changes in discrimination since 1989 and changes in the causes of discrimination since 1989.

    As did previous studies of HDS 1989 and HDS 2000, we find that rental housing discrimi­nation against Blacks still exists but also that it declined significantly between 1989 and 2000. These studies indicate that, since 1989, discrimination against Hispanics has not declined as much or as consistently as has discrimination against Blacks. Our new analysis yields several hints about changes in the causes of discrimination between 1989 and 2000. We find a significant increase in discrimination against Blacks by large rental housing agencies and by Hispanic rental agents. We also find significant decreases in discrimination against Hispanics by female agents and that Hispanic renters with children face less discrimination in 2000 than they did in 1989.

     

  • The Determinants of Teacher Attrition in Upstate  New York.” 2008. Public Finance Review 36:112-44.

    Ondrich, Jan, Emily Pas, and John Yinger

    Abstract

    Policy makers and scholars have long been interested in teacher attrition, particularly in poor, urban schools. We investigate the determinants of teacher attrition in five large metropolitan areas in upstate New York. We focus on a teacher's decision to leave a school district or to leave teaching using the Prentice-Gloeckler-Meyer technique for proportional hazards with unobserved heterogeneity. We find that teachers in districts with higher salaries relative to nonteaching salaries in the same county are less likely to leave teaching and that a teacher is less likely to change districts when he or she teaches in a district near the top of the teacher salary distribution in that county. We also find, however, that the impact of salary on the probability of leaving teaching is small and that very large salary increases would be required to offset the impact of concentrated student disadvantage on the attrition of female teachers.    

     

  • Now You See It, Now You Don’t: Why Do Real  Estate Agents Withhold Houses from Black Customers?” 2003. Review of Economics and

    Statistics, 85(4): 854-873.

    Ondrich, Jan, Stephen Ross, and John Yinger

    Abstract

    Potential home buyers may initiate contact with a real estate agent by asking to see a particular advertised house. This paper asks whether an agent's response to such a request depends on the race of the buyer or on whether the house is located in an integrated neighborhood. Like previous research about the causes of housing discrimination, this paper uses data from fair housing audits, a matched-pair technique for comparing the treatment of equally qualified black and white home buyers. However, we shift the focus from differences in the treatment of paired buyers to agent decisions concerning an individual house. Using a sample of all houses seen during the 1989 national Housing Discrimination Study, we estimate a random-effect, multinomial logit model to explain a real estate agent's joint decisions concerning whether to show each house to a black auditor and to a white auditor. We find evidence that agents interpret an initial housing request as an indication of a customer's preferences, but also are more likely to withhold a house from all customers when it is in an integrated suburban neighborhood (redlining). Moreover, agents' marketing efforts increase with asking price for white, but not for black, customers; blacks are more likely than whites to see houses in suburban, integrated areas (steering); and the houses agents show are more likely to deviate from the initial request when the customer is black than when the customer is white. These three findings are consistent with the possibility that agents act upon the belief that some types of transactions are relatively unlikely for black customers (statistical discrimination).

     

  • The Liberalization of Maternity  Leave Policy and the Return to Work after Childbirth in Germany.”  2003. Review of  Economics of the Household, 1(1): 77-110.

    Ondrich, Jan, Katharina K. Spiess, Qing Yang, and Gert G. Wagner

    Abstract
    German federal law has increased the potential duration of maternity leave five times since 1985. A theoretical model demonstrates that the cumulative return probability at potential duration cannot decline unless the mother's employment conditions or career expectations change. We estimate return to work hazards from the German Socio-Economic Panel for women bearing children in the period 1984–1991 and predict cumulative return probabilities for first-time mothers and mothers with a previous birth. The pattern of cumula
    tive return probabilities as potential duration increases is consistent with the hypothesis that employment conditions or career expectations frequently change for mothers taking longer leaves. Copyright Kluwer Academic Publishers.

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