Arbeitspapier

Housing wealth and wage bargaining

We examine the relationship between housing equity and wage earnings. We first provide a simple model of wage bargaining where failure leads to both job loss and mortgage default. Moreover, foreclosure generates disutility beyond selling a home. We test this prediction using nine waves of the national American Housing Survey. Employing a rich set of time and place controls, individual fixed effects, and an instrumental variable strategy, we find that people with an underwater mortgage command a significantly lower wage than other homeowners. This finding survives a number of robustness checks. We also include other determinants of house lock such as a favorable mortgage interest rate relative to the current rate and a capped property tax assessment, but we do not find these factors lower earnings. We conclude that negative equity matters because default is unpleasant or costly, not because it precludes an out-of-state job search.

Language
Englisch

Bibliographic citation
Series: Working Paper ; No. 2012-20

Classification
Wirtschaft
Household Behavior: General
Wages, Compensation, and Labor Costs: General
Urban, Rural, Regional, Real Estate, and Transportation Economics: Household Analysis: General
Subject
negative equity
wages
mortgage default

Event
Geistige Schöpfung
(who)
Cunningham, Chris
Reed, Robert R.
Event
Veröffentlichung
(who)
Federal Reserve Bank of Atlanta
(where)
Atlanta, GA
(when)
2012

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Cunningham, Chris
  • Reed, Robert R.
  • Federal Reserve Bank of Atlanta

Time of origin

  • 2012

Other Objects (12)