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Employment Protection and Household Mortgage Debt

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  • Shang, Longfei
  • Saffar, Walid

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.

Suggested Citation

  • Shang, Longfei & Saffar, Walid, 2023. "Employment Protection and Household Mortgage Debt," Journal of Banking & Finance, Elsevier, vol. 149(C).
    • Handle: RePEc:eee:jbfina:v:149:y:2023:i:c:s0378426623000420
    DOI: 10.1016/j.jbankfin.2023.106817
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    References listed on IDEAS

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    More about this item

    Keywords

    Employment protection; Mortgage debt; Wrongful discharge law;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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