Incapacity to Pay or Moral Hazard? Public Mortgage Rates Delinquency in Chile

Luis Marcano () and Inder Ruprah ()

No 308, OVE Working Papers from Inter-American Development Bank, Office of Evaluation and Oversight (OVE)

Abstract: High delinquency rate of publicly provided mortgages in social housing programs are often interpreted to be due to moral hazard. In this paper we show that the typically used parametric approaches give misleading results due to overlooked confounding and selection biases. We show that by using the more appropriate impact or treatment non-parametric approach the problem of high delinquency rate in publicly provided mortgages is due to the incapacity to pay and not due to moral hazard. The results caution against public policies to encourage private mortgage providers to move down market, and suggest eliminating mortgages and correspondingly increasing the grant component of the programs.

Keywords: Moral hazard; mortgages; delinquency rate; social housing programs; confounding bias. (search for similar items in EconPapers)
JEL-codes: G21 H43 R31 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2008-03
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (1)

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