Work

Long shadow of the U.S. mortgage expansion: Evidence from local labour markets

Year: 2024

Type: article

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.

Source: European Economic Review

DOI: 10.1016/j.euroecorev.2024.104931

Authors: Aruni Mitra, Mengying Wei

Institutions: University of Manchester, University of International Business and Economics

Language: English

Topic: Housing Market and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,170