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Housing Wealth, Marital Stability and Labor Supply :an Intertemporal Analysis

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  • Bram De Rock
  • Mariia Kovaleva
  • Tom Potoms

Abstract

We study how house price shocks affect marital stability and household labor supply. We address this question using a dynamic collective household model with limited commitment. We find that positive house price shocks increase the divorce rate, and that leverage ratios such as loan-to-income (LTI) and loan-to-value (LTV) determine the transmission of house price shocks on divorce. Given its importance, we then analyze a tightening of the credit market through the LTI-limit. We show that neglecting the divorce and intra-household bargaining channels significantly biases the individual welfare effects of such policies.

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  • Bram De Rock & Mariia Kovaleva & Tom Potoms, 2025. "Housing Wealth, Marital Stability and Labor Supply :an Intertemporal Analysis," Working Papers ECARES 2025-04, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/389796
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    Keywords

    Limited commitment; housing demand; labor supply; credit market policy;
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