Long shadow of the U.S. mortgage expansion: Evidence from local labour markets

Aruni Mitra and Mengying Wei

European Economic Review, 2025, vol. 172, issue C

Abstract: We construct U.S. county-level credit supply shocks by interacting the national mortgage growth of lenders in the early 2000s with a county’s initial exposure to those lenders. Counties with a more expansionary credit shock experienced a greater housing boom between 2003 and 2006 without a positive spillover to local labour market performance. During the Great Recession, the same counties experienced a larger drop in growth rates of mortgages, house prices and wages, and a larger increase in unemployment rates. While unemployment rates declined faster in those areas after the recession, wage growth remained depressed. The credit shock also induced a long-run increase in older firms’ employment share, suggesting a reduction in business dynamism.

Keywords: Mortgage lending; Credit supply shocks; Local labour markets (search for similar items in EconPapers)
JEL-codes: E24 E32 E44 G01 G20 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Long Shadow of the U.S. Mortgage Expansion: Evidence from Local Labour Markets (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:172:y:2025:i:c:s0014292124002605

DOI: 10.1016/j.euroecorev.2024.104931

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