The Effects of Negative Equity on Children's Educational Outcomes

Vicki Been, Ingrid Ellen, David Figlio, Ashlyn Aiko Nelson, Stephen L. Ross (), Amy Schwartz and Leanna Stiefel
Additional contact information
Vicki Been: New York University
Ingrid Ellen: New York University
Ashlyn Aiko Nelson: Indiana University
Stephen L. Ross: University of Connecticut
Leanna Stiefel: New York University

No 2021-007, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: This study examines the effects of negative equity on children's academic performance, using data on children attending Florida public schools and housing transactions from the State of Florida. Our empirical strategy exploits variation over time in the timing of family moves to Florida in order to account for household sorting into neighborhoods and schools and selection into initial mortgage terms. In contrast to the existing literature on foreclosure and children's outcomes, we find that Florida students with the highest risk of negative equity exhibit significantly higher test score growth. These effects are largest among Black students and students who qualify for free or reduced-priced lunch. We find evidence supporting two underlying mechanisms: (1) consumption patterns suggest that families in negative equity may reduce the impact of income losses on consumption by forgoing mortgage payments, and (2) mobility patterns suggest that families exposed to high levels of negative equity may move to schools that are of higher quality on average. While negative equity and foreclosure are undesirable, the changing incentives in terms of mortgage delinquency may have helped families manage the economic shocks caused by the great recession, as well as temporarily reduced the housing market barriers faced by low income households when attempting to access educational opportunities.

Keywords: housing wealth; mortgage; racial disparities; foreclosure (search for similar items in EconPapers)
JEL-codes: I24 J15 O18 R23 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-ure
Note: MIP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://humcap.uchicago.edu/RePEc/hka/wpaper/Been_E ... -negative-equity.pdf First version, January 31, 2021 (application/pdf)

Related works:
Working Paper: The Effects of Negative Equity on Children’s Educational Outcomes (2021)
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:hka:wpaper:2021-007

Access Statistics for this paper

More papers in Working Papers from Human Capital and Economic Opportunity Working Group Contact information at EDIRC.
Bibliographic data for series maintained by Jennifer Pachon ().