Housing Wealth, Marital Stability and Labor Supply:an Intertemporal Analysis

Bram De Rock, Mariia Kovaleva and Tom Potoms

No 2025-04, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: We study how house price shocks affect marital stability and household labor supply. We address this question using a dynamic collective household model with limited commitment. We find that positive house price shocks increase the divorce rate, and that leverage ratios such as loan-to-income (LTI) and loan-to-value (LTV) determine the transmission of house price shocks on divorce. Given its importance, we then analyze a tightening of the credit market through the LTI-limit. We show that neglecting the divorce and intra-household bargaining channels significantly biases the individual welfare effects of such policies.

Keywords: Limited commitment; housing demand; labor supply; credit market policy (search for similar items in EconPapers)
Pages: 65 p.
Date: 2025-03
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