Abstract

https://ssrn.com/abstract=2185198
 


 



Unemployment Insurance as a Housing Market Stabilizer


Joanne W. Hsu


Federal Reserve Board of Governors

David A. Matsa


Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Brian Melzer


Northwestern University - Kellogg School of Management - Department of Finance

June 29, 2016


Abstract:     
This paper studies the impact of unemployment insurance (UI) on the housing market. Exploiting heterogeneity in UI generosity across U.S. states and over time, we find that UI helps the unemployed avoid mortgage default. We estimate that UI expansions during the Great Recession prevented more than 1.3 million foreclosures and insulated home values from labor market shocks. The results suggest that policies that make mortgages more affordable can reduce foreclosures even when borrowers are severely underwater. An optimal UI policy during housing downturns would weigh, among other benefits and costs, the deadweight losses avoided from preventing mortgage defaults.

Number of Pages in PDF File: 77


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Date posted: December 5, 2012 ; Last revised: December 12, 2016

Suggested Citation

Hsu, Joanne W. and Matsa, David A. and Melzer, Brian, Unemployment Insurance as a Housing Market Stabilizer (June 29, 2016). Available at SSRN: https://ssrn.com/abstract=2185198 or http://dx.doi.org/10.2139/ssrn.2185198

Contact Information

Joanne W. Hsu
Federal Reserve Board of Governors ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States

David A. Matsa (Contact Author)
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8337 (Phone)
847-491-5719 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Brian Melzer
Northwestern University - Kellogg School of Management - Department of Finance ( email )
Evanston, IL 60208
United States
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