IDEAS home Printed from https://ideas.repec.org/a/aea/aejpol/v16y2024i3p1-26.html

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

Author

Listed:
  • Anil Kumar
  • Che-Yuan Liang

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.

Suggested Citation

  • Anil Kumar & Che-Yuan Liang, 2024. "Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment," American Economic Journal: Economic Policy, American Economic Association, vol. 16(3), pages 1-26, August.
    • Handle: RePEc:aea:aejpol:v:16:y:2024:i:3:p:1-26
    DOI: 10.1257/pol.20200683
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/pol.20200683
    Download Restriction: no
    File URL: https://doi.org/10.3886/E192289V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/pol.20200683.appx
    Download Restriction: no
    File URL: https://www.aeaweb.org/doi/10.1257/pol.20200683.ds
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://libkey.io/10.1257/pol.20200683?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Klaus W. Deininger & Daniel Ayalew Ali, 2024. "Land Price Effects of Informality, Farm Size, and Land Reform : Evidence from More Than One Million Transactions in Ukraine," Policy Research Working Paper Series 11013, The World Bank.
    2. Muhammad Nawaz & Niraj P. Koirala & Hassan Butt, 2025. "Labor Supply as a Buffer: The Implication of Credit Constraints in the US," JRFM, MDPI, vol. 18(6), pages 1-21, June.
    3. Kumar, Anil & Liang, Che-Yuan, 2019. "Credit constraints and GDP growth: Evidence from a natural experiment," Economics Letters, Elsevier, vol. 181(C), pages 190-194.
    4. Gissur Ó Erlingsson & Jonas Klarin & Eva Maria Mörk, 2021. "Does Size Matter? Evidence from Municipality Break-Ups," CESifo Working Paper Series 9042, CESifo.
    5. Klaus W. Deininger & Thea Hilhorst & Zevenbergen,Jaap & Nkurunziza,Emmanuel, 2025. "Capitalizing on Digital Transformation to Enhance the Effectiveness of Property Institutions : Conceptual Background and Evidence from 85 Countries," Policy Research Working Paper Series 11100, The World Bank.
    6. Low, Hamish & Sánchez-Marcos, Virginia, 2024. "Labour supply and the cost of house price booms and busts," Labour Economics, Elsevier, vol. 90(C).

    More about this item

    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejpol:v:16:y:2024:i:3:p:1-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.