Long Shadow of the U.S. Mortgage Expansion: Evidence from Local Labour Markets

Aruni Mitra and Mengying Wei

MPRA Paper from University Library of Munich, Germany

Abstract: We construct U.S. county-level credit supply shocks by interacting the mortgage growth of multi-market lenders with a county’s initial exposure to those lenders. The credit shocks did not impact the local labour markets during the credit boom but had a negative effect during the Great Recession. While local unemployment rates recovered post-Recession, wage growth remained depressed. Further, a long-run increase in older firms’ employment share suggests a credit-induced reduction in business dynamism and labour demand. A mechanism through occasionally binding financial constraints tied to house prices can qualitatively explain these asymmetric effects of credit shocks in booms and busts.

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: 2023-04-05
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-mac and nep-ure
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Journal Article: Long shadow of the U.S. mortgage expansion: Evidence from local labour markets (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116969

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