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Title: Working More to Pay the Mortgage: Household Debt, Consumption Commitments and Labor Supply

Citation Type: Miscellaneous

Publication Year: 2019

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Abstract: This paper analyzes how a change in the size of mortgage payment affects household’s labor supply. Using income tax data for the universe of Polish population and exploiting variation in floating-rate mortgage payments driven by interbank rates fluctuations, I show that an increase in payment induces households to work and earn more. Higher income covers 30-45% of the increase in payment. The effect increases with households’ debt-toincome ratio, is higher for more flexible income sources and is accompanied by a decrease in proxies for consumption expenditures. The effect is driven by several mechanisms: spousal labor supply, change of job and additional income from after-hours work. Consistent with a model of labor decisions with consumption commitements, but contrary to other mechanisms such as debt overhang, household debt can increase labor supply

Url: https://pdfs.semanticscholar.org/89ea/8ac3f8079b97aa8ee5cb14e8c3e7dc0dbf0e.pdf

Url: https://www.kellogg.northwestern.edu/faculty/zator/DebtLaborSupply.pdf

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Authors: Zator, Michal

Publisher: Northwestern University

Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure, Poverty and Welfare

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