Fracking and Mortgage Default
53 Pages Posted: 6 Apr 2017 Last revised: 29 Nov 2017
Date Written: 2017-03-01
This paper ﬁnds that increased hydraulic fracturing, or "fracking," along the Marcellus Formation in Pennsylvania had a signiﬁcant, negative effect on mortgage credit risk. Controlling for potential endogeneity bias by utilizing the underlying geologic properties of the land as instrumental variables for fracking activity, we ﬁnd that mortgages originated before the 2007 boom in shale gas, were, post-boom, signiﬁcantly less likely to default in areas with greater drilling activity. The weight of evidence suggests that the greatest beneﬁt from fracking came from strengthening the labor market, consistent with the double trigger hypothesis of mortgage default. The results also suggest that increased fracking activity raised house prices at the county level.
Keywords: mortgage default, hydraulic fracking, house prices, shale gas
JEL Classification: G21, Q51, R11
Suggested Citation: Suggested Citation