Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment

Anil Kumar; Che-Yuan Liang

doi:10.1257/pol.20200683

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Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment

Journal article

Peer reviewed

Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment

Anil Kumar and Che-Yuan Liang

American economic journal. Economic policy, Vol.16(3), pp.1-26

08/01/2024

DOI: 10.1257/pol.20200683

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Abstract

We exploit the 1997 and 2003 constitutional amendments in Texas--allowing home equity loans and lines of credit for nonhousing purposes--as natural experiments to estimate the effect of easier credit access on the labor market. Using state-level as well as micro data, we find that easier access to housing credit led to a notably lower labor force participation rate between 1997 and 2007. Our findings are remarkably robust to improved synthetic control methods based on insights from machine learning. Our research shows that negative labor market effects of easier credit access are important for assessing its stimulative impact on overall growth.

Credit

Banks, Depository Institutions, Micro Finance Institutions, Mortgages (G21)

Economics of Gender, Non-labor Discrimination (J16)

Household Saving, Borrowing, Debt, and Wealth (G51)

Labor Force Participation

Neural Networks and Related Topics (C45)

Northern America

Participation

Time Allocation and Labor Supply (J22)

U.S

Details

Title: Subtitle: Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment
Creators: Anil Kumar
Che-Yuan Liang
Resource Type: Journal article
Publication Details: American economic journal. Economic policy, Vol.16(3), pp.1-26
Publisher: AMER ECONOMIC ASSOC
DOI: 10.1257/pol.20200683
ISSN: 1945-7731
eISSN: 1945-774X
Language: English
Date published: 08/01/2024
Academic Unit: Economics
Record Identifier: 9984658348902771

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