Negative equity and wages

Christopher Cunningham (ccunnin75@gmail.com) and Robert R. Reed

Regional Science and Urban Economics, 2013, vol. 43, issue 6, 841-849

Abstract: We examine the relationship between housing equity and wage earnings using nine waves of the national American Housing Survey from 1985 to 2003. Employing a rich set of time and place controls, a synthetic mortgage instrumental variable strategy, and a first difference estimator we find that people underwater on their mortgage command a significantly lower wage than other homeowners. The finding survives a number of robustness checks for reverse causality and unobserved heterogeneity. We also explore other determinants of “house lock” including loss aversion, a low existing mortgage interest rate and property tax assessment caps, but do not find these factors mitigate the effect of negative equity on wages.

Keywords: Negative equity; Wages; Mortgage default; Housing; Mobility (search for similar items in EconPapers)
JEL-codes: D10 J30 R20 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:43:y:2013:i:6:p:841-849

DOI: 10.1016/j.regsciurbeco.2013.08.005

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