Employment Protection and Household Mortgage Debt

Longfei Shang and Walid Saffar

Journal of Banking & Finance, 2023, vol. 149, issue C

Abstract: Exploiting the staggered adoption of U.S. state-level labor protection laws, we find that household mortgage debt increases following the passage of these laws. Our findings are consistent with theories predicting that better employment protection reduces households’ layoff risk, making lenders less concerned about borrowers’ ability to repay their debts and more inclined to offer them mortgage loans. Supporting this channel, we find that the loan approval rate increases following the adoption of labor protection laws and that the effect of the laws’ adoption on mortgage debt is concentrated in old households.

Keywords: Employment protection; Mortgage debt; Wrongful discharge law (search for similar items in EconPapers)
JEL-codes: G11 G51 J63 K31 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:149:y:2023:i:c:s0378426623000420

DOI: 10.1016/j.jbankfin.2023.106817

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