The Impact of Housing Credit on Personal Bankruptcy

62 Pages Posted: 2 Apr 2015 Last revised: 26 Nov 2017

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Changcheng Song

National University of Singapore (NUS)

Date Written: November 11, 2017


We use a linked housing transaction dataset and a personal bankruptcy dataset to study the impact of housing credit on personal bankruptcy in Singapore. Using a difference-in-differences (DD) approach, we find that an increase in housing credit increases the monthly instalment by 560-900 Singapore dollar, and increases the likelihood of personal bankruptcy by 0.15-0.22 percentage points for house buyers who have more exposure to the housing credit increase. To investigate the mechanisms, we show that the observed effect is unlikely to be driven by the composition effect and selection of irresponsible buyers. The effect is mainly due to the increasing debt burden. We also apply a regression discontinuity design and find that those who bought houses within 6 months after the policy are 0.43 percentage points more likely to declare personal bankruptcy.

Keywords: Personal Bankruptcy, Housing Market, Housing Credit Policy, Loan-to-Value Ratio, Household Finance, Real Estate

JEL Classification: D14, R30, E51

Suggested Citation

Agarwal, Sumit and Song, Changcheng, The Impact of Housing Credit on Personal Bankruptcy (November 11, 2017). Available at SSRN: or

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
8118 9025 (Phone)


Changcheng Song (Contact Author)

National University of Singapore (NUS) ( email )

1 Arts Link, AS2 05-37
Singapore, 117568
+6565166018 (Phone)

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