Household Leverage and Labor Market Outcomes Evidence from a Macroprudential Mortgage Restriction

Posted: 28 Apr 2021

See all articles by Gazi Kabas

Gazi Kabas

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Kasper Roszbach

Norges Bank - Research Department; University of Groningen - Faculty of Economics and Business

Date Written: April 15, 2021

Abstract

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.

Suggested Citation

Kabas, Gazi and Roszbach, Kasper F., Household Leverage and Labor Market Outcomes Evidence from a Macroprudential Mortgage Restriction (April 15, 2021). Available at SSRN: https://ssrn.com/abstract=3835232 or http://dx.doi.org/10.2139/ssrn.3835232

Gazi Kabas (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

HOME PAGE: http://https://sites.google.com/view/gazikabas/home

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Kasper F. Roszbach

Norges Bank - Research Department ( email )

P.O. Box 1179
Oslo, N-0107
Norway

University of Groningen - Faculty of Economics and Business ( email )

Department of Economics, Econometrics and Finance
Nettelbosje 2
Groningen, NL 9747 AE
Netherlands

HOME PAGE: http://www.rug.nl/staff/k.f.roszbach/

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