Employment Protection and Household Mortgage Debt

Longfei Shang, Walid Saffar

Research output: Journal article publicationJournal articleAcademic researchpeer-review

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.

Original languageEnglish
Article number106817
JournalJournal of Banking and Finance
Volume149
DOIs
Publication statusPublished - Apr 2023

Keywords

  • Employment protection
  • Mortgage debt
  • Wrongful discharge law

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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