Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default
Kristopher Gerardi (),
Kyle Herkenhoff (),
Lee Ohanian () and
Paul S. Willen
No 21630, NBER Working Papers from National Bureau of Economic Research, Inc
This paper exploits matched data from the PSID on borrower mortgages with income and demographic data to quantify the relative importance of negative equity, versus lack of ability to pay, as affecting default between 2009 and 2013. These data allow us to construct household budgets sets that provide better measures of ability to pay. We use instrumental variables to quantify the impact of ability to pay, including job loss and disability, versus negative equity. Changes in ability to pay have the largest estimated effects. Job loss has an equivalent effect on default likelihood as a 35 percent decline in equity.
JEL-codes: G21 G33 R3 R51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg and nep-ure
Note: EFG ED
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed
Published as Kristopher Gerardi & Kyle F. Herkenhoff & Lee E. Ohanian & Paul S. Willen, 2018. "Can’t Pay or Won’t Pay? Unemployment, Negative Equity, and Strategic Default," The Review of Financial Studies, vol 31(3), pages 1098-1131.
Downloads: (external link)
Journal Article: Can’t Pay or Won’t Pay? Unemployment, Negative Equity, and Strategic Default (2018)
Working Paper: Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default (2017)
Working Paper: Can't pay or won't pay?: unemployment, negative equity, and strategic default (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:21630
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().