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Mortgage Policies And Their Effects On Racial Segregation And Upward Mobility

Author

Listed:
  • Nirupama Kulkarni

    (Centre for Advanced Financial Research and Learning (CAFRAL))

  • Ulrike Malmendier

    (University of California, Berkeley)

Abstract

We document that housing policies aimed at increasing homeownership and reducing disparities can have adverse consequences, arising from sorting and deteriorating place-based factors. Exploiting variation in the ease of mortgage financing and targeting of underserved neighbourhoods in the 1992 GSE Act, we show that, while Black homeownership increased in targeted neighbourhoods, white families moved out, especially when mortgage financing became more accessible in the surrounding areas. Segregation increased and upward mobility deteriorated among low-income Black families and among those low-income white families who remained. We identify declining house prices, education spending, and school quality in targeted areas as plausible channels.

Suggested Citation

  • Nirupama Kulkarni & Ulrike Malmendier, 2021. "Mortgage Policies And Their Effects On Racial Segregation And Upward Mobility," Working Papers 022290, Centre for Advanced Financial Research and Learning (CAFRAL).
    • Handle: RePEc:ris:cafral:022290
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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • 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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