Incapacity to Pay or Moral Hazard? Public Mortgage Rates Delinquency in Chile
AbstractHigh delinquency rate of publicly provided mortgages in social housing programs are often interpreted to be due to moral hazard. In this paper we show that the typically used parametric approaches give misleading results due to overlooked confounding and selection biases. We show that by using the more appropriate impact or treatment non-parametric approach the problem of high delinquency rate in publicly provided mortgages is due to the incapacity to pay and not due to moral hazard. The results caution against public policies to encourage private mortgage providers to move down market, and suggest eliminating mortgages and correspondingly increasing the grant component of the programs.
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Bibliographic InfoPaper provided by Inter-American Development Bank, Office of Evaluation and Oversight (OVE) in its series OVE Working Papers with number 0308.
Length: 16 pages
Date of creation: Mar 2008
Date of revision:
Moral hazard; mortgages; delinquency rate; social housing programs; confounding bias.;
Find related papers by JEL classification:
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
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- Luis Marcano & Inder J. Ruprah, 2008. "An Impact Evaluation of Chile’s Progressive Housing Program," OVE Working Papers 0608, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
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