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Incapacity to Pay or Moral Hazard?: Public Mortgage Delinquency Rates in Chile

Author

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  • Marcano, Luis
  • Ruprah, Inder J.

Abstract

High delinquency rate of publicly provided mortgages in social housing programs are often interpreted to be due to moral hazard. In this working paper, the authors show that the typically used parametric approaches give misleading results due to overlooked confounding and selection biases. As evidenced 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.

Suggested Citation

  • Marcano, Luis & Ruprah, Inder J., 2008. "Incapacity to Pay or Moral Hazard?: Public Mortgage Delinquency Rates in Chile," IDB Publications (Working Papers) 2908, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:2908
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    File URL: https://publications.iadb.org/publications/english/document/Incapacity-to-Pay-or-Moral-Hazard-Public-Mortgage-Delinquency-Rates-in-Chile.pdf
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    References listed on IDEAS

    as
    1. Inder J. Ruprah & Luis Marcano, 2007. "A Meta-Impact Evaluation of Social Housing Programs: The Chilean Case," IDB Publications (Working Papers) 33418, Inter-American Development Bank.
    2. Richard Blundell & Monica Costa Dias, 2009. "Alternative Approaches to Evaluation in Empirical Microeconomics," Journal of Human Resources, University of Wisconsin Press, vol. 44(3).
    3. García, Carlos & Morandé, Felipe, 2004. "Financiamiento de la Vivienda en Chile," IDB Publications (Working Papers) 2164, Inter-American Development Bank.
    4. Carlos García & Felipe Morandé, 2004. "Financiamiento de la Vivienda en Chile," IDB Publications (Working Papers) 7644, Inter-American Development Bank.
    5. Inder J Ruprah & Luis T Marcano, 2007. "A Meta-Impact Evaluation of Social Housing Programs: The Chilean Case," OVE Working Papers 0207, Inter-American Development Bank, Office of Evaluation and Oversight (OVE).
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Marcano, Luis & Ruprah, Inder J., 2008. "An Impact Evaluation of Chile's Progressive Housing Program," IDB Publications (Working Papers) 2896, Inter-American Development Bank.

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    More about this item

    Keywords

    WP-03/08;

    JEL classification:

    • 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
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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