Household Leverage and Labor Market Outcomes Evidence from a Macroprudential Mortgage Restriction
Posted: 28 Apr 2021
Date Written: April 15, 2021
Does households' leverage matter for their job search, matching in the labor market and pay? To answer this question we exploit a loan-to-value ratio restriction in Norway that exogenously reduces household leverage. Using comprehensive register data, we find that lower leverage enables displaced workers to find jobs with higher starting wages. Lower leverage increases the probability of finding jobs in higher paying firms and the likelihood of switching into new occupations and industries. The positive effects are long-lasting and more pronounced for young and higher educated workers. Our results indicate that policies aimed at limiting households' leverage have the potential to substantially improve their labor market outcomes.
Keywords: Household Leverage, Household Debt, Job Displacement, Unemployment Spell, Macro-prudential Policy.
JEL Classification: E21, G21, G51, J21.
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