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Why do home owners work longer hours?

Author

Listed:
  • Renata Bottazzi

    (Institute for Fiscal Studies and University of Bologna)

  • Hamish Low

    (Institute for Fiscal Studies and University of Oxford & Nuffield College)

  • Matthew Wakefield

    (Institute for Fiscal Studies and University of Bologna)

Abstract

This paper uses a structural model to address the question of why home-owners with large mortgage debt work longer hours than those without such debt. We consider whether this is due to lower net wealth or to capital market imperfections, including mortgage constraints that depend on current earnings and, therefore, labour supply choices. We show that the need to meet current mortgage commitments can generate the observed correlation, and this impact of current commitments arises from the institutional borrowing constraints. We also show that labour supply as a function of household debt is highly nonlinear: those with greater debt are more likely to face binding borrowing constraints and their labour supply is more variable.

Suggested Citation

  • Renata Bottazzi & Hamish Low & Matthew Wakefield, 2007. "Why do home owners work longer hours?," IFS Working Papers W07/10, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:07/10
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Stratford, Beth, 2020. "The Threat of Rent Extraction in a Resource-constrained Future," Ecological Economics, Elsevier, vol. 169(C).
    2. Perugini, Cristiano, 2020. "Patterns and drivers of household income dynamics in Russia: The role of access to credit," BOFIT Discussion Papers 11/2020, Bank of Finland Institute for Emerging Economies (BOFIT).
    3. Andrew Benito & Jumana Saleheen, 2013. "Labour Supply as a Buffer: Evidence from UK Households," Economica, London School of Economics and Political Science, vol. 80(320), pages 698-720, October.
    4. David Aristei & Cristiano Perugini, 2022. "Credit and income mobility in Russia," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(3), pages 639-669, September.
    5. Rossi, Mariacristina & Trucchi, Serena, 2016. "Liquidity constraints and labor supply," European Economic Review, Elsevier, vol. 87(C), pages 176-193.
    6. Iacoviello, Matteo & Pavan, Marina, 2013. "Housing and debt over the life cycle and over the business cycle," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 221-238.
    7. Bram De Rock & Mariia Kovaleva & Tom Potoms, 2023. "A Spouse and a House are all we need? Housing Demand, Labor Supply and Divorce over the Lifecycle," Working Papers ECARES 2023-18, ULB -- Universite Libre de Bruxelles.
    8. Perugini, Cristiano, 2020. "Patterns and drivers of household income dynamics in Russia : The role of access to credit," BOFIT Discussion Papers 11/2020, Bank of Finland, Institute for Economies in Transition.
    9. R. Bottazzi & T. Crossley & M. Wakefield, 2011. "House Prices and Home Ownership: a Cohort Analysis," Working Papers wp790, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Aquilante, Tommaso & Livio, Luca & Potoms, Tom, 2020. "On-the-job training and intra-family dynamics," Bank of England working papers 873, Bank of England.
    11. Bo Zhao, 2018. "Too Poor to Retire? Housing Prices and Retirement," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 27-47, January.
    12. repec:zbw:bofitp:2020_011 is not listed on IDEAS
    13. Renata Bottazzi & Thomas Crossley & Matthew Wakefield, 2012. "Late starters or excluded generations? A cohort analysis of catch up in home ownership in England," IFS Working Papers W12/10, Institute for Fiscal Studies.
    14. Orazio Attanasio & Renata Bottazzi & Hamish Low & Lars Nesheim & Matthew Wakefield, 2012. "Modelling the Demand for Housing over the Lifecycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(1), pages 1-18, January.
    15. Bunn, Philip & Chadha, Jagjit & Lazarowicz, Thomas & Millard, Stephen & Rockall, Emma, 2021. "Household debt and labour supply," Bank of England working papers 941, Bank of England.

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