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Long shadow of the U.S. mortgage expansion: Evidence from local labour markets

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  • Mitra, Aruni
  • Wei, Mengying

Abstract

We construct U.S. county-level credit supply shocks by interacting the national mortgage growth of lenders in the early 2000s with a county’s initial exposure to those lenders. Counties with a more expansionary credit shock experienced a greater housing boom between 2003 and 2006 without a positive spillover to local labour market performance. During the Great Recession, the same counties experienced a larger drop in growth rates of mortgages, house prices and wages, and a larger increase in unemployment rates. While unemployment rates declined faster in those areas after the recession, wage growth remained depressed. The credit shock also induced a long-run increase in older firms’ employment share, suggesting a reduction in business dynamism.

Suggested Citation

  • Mitra, Aruni & Wei, Mengying, 2025. "Long shadow of the U.S. mortgage expansion: Evidence from local labour markets," European Economic Review, Elsevier, vol. 172(C).
    • Handle: RePEc:eee:eecrev:v:172:y:2025:i:c:s0014292124002605
    DOI: 10.1016/j.euroecorev.2024.104931
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    More about this item

    Keywords

    Mortgage lending; Credit supply shocks; Local labour markets;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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