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Incapacity to pay or moral hazard? Public mortgage delinquency rates in Chile

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  • Luis Marcano
  • Inder Ruprah

Abstract

High delinquency rate of publicly provided mortgages in social housing programmes are often interpreted to be due to moral hazard. In this article we show that the typically used parametric approaches give misleading results because of overlooked confounding and selection biases. We show that using the more appropriate impact or treatment nonparametric approach the problem of high delinquency rate in publicly provided mortgages is due to the incapacity to pay and not due to moral hazard. The results caution against public policies to encourage private mortgage providers to move down market, and suggest eliminating mortgages and correspondingly increasing the grant component of the programmes.

Suggested Citation

  • Luis Marcano & Inder Ruprah, 2011. "Incapacity to pay or moral hazard? Public mortgage delinquency rates in Chile," Applied Economics Letters, Taylor & Francis Journals, vol. 18(11), pages 1015-1020.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:11:p:1015-1020
    DOI: 10.1080/13504851.2010.522510
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    References listed on IDEAS

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    1. Richard Blundell & Monica Costa Dias, 2009. "Alternative Approaches to Evaluation in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
    2. Carlos García & Felipe Morandé, 2004. "Financiamiento de la Vivienda en Chile," IDB Publications (Working Papers) 7644, Inter-American Development Bank.
    3. Inder J Ruprah & Luis T Marcano, 2007. "A Meta-Impact Evaluation of Social Housing Programs: The Chilean Case," OVE Working Papers 0207, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
    4. García, Carlos & Morandé, Felipe, 2004. "Financiamiento de la Vivienda en Chile," IDB Publications (Working Papers) 2164, Inter-American Development Bank.
    5. Inder J. Ruprah & Luis Marcano, 2007. "A Meta-Impact Evaluation of Social Housing Programs: The Chilean Case," IDB Publications (Working Papers) 33418, Inter-American Development Bank.
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    Cited by:

    1. Marcano, Luis & Ruprah, Inder J., 2008. "An Impact Evaluation of Chile's Progressive Housing Program," IDB Publications (Working Papers) 2896, Inter-American Development Bank.

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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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