Housing wealth and wage bargaining

Christopher Cunningham () and Robert Reed ()

No 2012-20, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: We examine the relationship between housing equity and wage earnings. We first provide a simple model of wage bargaining where failure leads to both job loss and mortgage default. Moreover, foreclosure generates disutility beyond selling a home. We test this prediction using nine waves of the national American Housing Survey. Employing a rich set of time and place controls, individual fixed effects, and an instrumental variable strategy, we find that people with an underwater mortgage command a significantly lower wage than other homeowners. This finding survives a number of robustness checks. We also include other determinants of \"house lock\" such as a favorable mortgage interest rate relative to the current rate and a capped property tax assessment, but we do not find these factors lower earnings. We conclude that negative equity matters because default is unpleasant or costly, not because it precludes an out-of-state job search..

Date: 2012
New Economics Papers: this item is included in nep-cse and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.frbatlanta.org/documents/pubs/wp/wp1220.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.frbatlanta.org/documents/pubs/wp/wp1220.pdf [301 Moved Permanently]--> https://www.frbatlanta.org/documents/pubs/wp/wp1220.pdf [301 Moved Permanently]--> https://www.atlantafed.org/documents/pubs/wp/wp1220.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:2012-20

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by Rob Sarwark ().