Home Equity and Labor Income: The Role of Constrained Mobility

Review of Financial Studies, Forthcoming

88 Pages Posted: 5 May 2017 Last revised: 18 Aug 2020

See all articles by Radhakrishnan Gopalan

Radhakrishnan Gopalan

Washington University in St. Louis - John M. Olin Business School

Barton H. Hamilton

Washington University, Saint Louis - John M. Olin School of Business

Ankit Kalda

Indiana University - Kelley School of Business - Department of Finance

David Sovich

University of Kentucky - Gatton College of Business and Economics

Date Written: June 1, 2019

Abstract

Using detailed data for homeowners in the U.S., we document a negative, non-linear relation between the loan-to-value ratio (LTV) of the primary residence and labor income. Consistent with constrained mobility for high LTV individuals, we find stronger effects among sub-prime, liquidity constrained individuals and those living in regions with limited local alternate employment opportunities and strict non-compete law enforcement. Though high LTV individuals are less likely to move residences across MSAs, they are more likely to change jobs without changing their residence. We find no effects among similar neighboring renters employed at the same firm with similar job tenure.

Keywords: Home Equity, Mortgage Debt, Income, Labor Mobility, Debt Overhang

JEL Classification: D10, G21, J30, J62, J61, R20

Suggested Citation

Gopalan, Radhakrishnan and Hamilton, Barton H. and Kalda, Ankit and Sovich, David, Home Equity and Labor Income: The Role of Constrained Mobility (June 1, 2019). Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2963114 or http://dx.doi.org/10.2139/ssrn.2963114

Radhakrishnan Gopalan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Barton H. Hamilton

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive, Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-8057 (Phone)
314-935-6359 (Fax)

HOME PAGE: http://www.olin.wustl.edu/faculty/hamiltonb/

Ankit Kalda (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

David Sovich

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

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