Household Liquidity Constraints and Labor Market Outcomes: Evidence from a Danish Mortgage Reform
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Household Liquidity Constraints and Labor Market Outcomes : Evidence from a Danish Mortgage Reform. / He, Alex Xi; Maire, Daniel Le.
I: Journal of Finance, Bind 78, Nr. 6, 2023, s. 3251-3298.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Household Liquidity Constraints and Labor Market Outcomes
T2 - Evidence from a Danish Mortgage Reform
AU - He, Alex Xi
AU - Maire, Daniel Le
N1 - Publisher Copyright: © 2023 the American Finance Association.
PY - 2023
Y1 - 2023
N2 - We study the causal effect of liquidity constraints on individual labor market outcomes by exploiting the 1992 mortgage reform in Denmark, which for the first time allowed homeowners to borrow against housing equity for nonhousing purposes. Following the reform, liquidity-constrained homeowners increased debt levels and had higher earnings growth and lower employment rates. The option to borrow against housing equity enabled liquidity-constrained individuals to move to high-wage jobs and invest in valuable human and physical capital. The results imply that relaxing household liquidity constraints during recessions can create better job matches, potentially increasing earnings and output in the longer run.
AB - We study the causal effect of liquidity constraints on individual labor market outcomes by exploiting the 1992 mortgage reform in Denmark, which for the first time allowed homeowners to borrow against housing equity for nonhousing purposes. Following the reform, liquidity-constrained homeowners increased debt levels and had higher earnings growth and lower employment rates. The option to borrow against housing equity enabled liquidity-constrained individuals to move to high-wage jobs and invest in valuable human and physical capital. The results imply that relaxing household liquidity constraints during recessions can create better job matches, potentially increasing earnings and output in the longer run.
U2 - 10.1111/jofi.13277
DO - 10.1111/jofi.13277
M3 - Journal article
AN - SCOPUS:85171867898
VL - 78
SP - 3251
EP - 3298
JO - The Journal of Finance
JF - The Journal of Finance
SN - 0022-1082
IS - 6
ER -
ID: 371621546