NBER Working Papers by Kyle F. Herkenhoff

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

Working Papers

May 2016How Credit Constraints Impact Job Finding Rates, Sorting & Aggregate Output
with Gordon Phillips, Ethan Cohen-Cole: w22274
We empirically and theoretically examine how consumer credit access affects displaced workers. Empirically, we link administrative employment histories to credit reports. We show that an increase in credit limits worth 10% of prior annual earnings allows individuals to take .15 to 3 weeks longer to find a job. Conditional on finding a job, they earn more and work at more productive firms. We develop a labor sorting model with credit to provide structural estimates of the impact of credit on employment outcomes, which we find are similar to our empirical estimates. We use the model to understand the impact of consumer credit on the macroeconomy. We find that if credit limits tighten during a downturn, employment recovers quicker, but output and productivity remain depressed. This is becau...
October 2015Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default
with Kristopher Gerardi, Lee E. Ohanian, Paul S. Willen: w21630
Previous research on mortgage default has been constrained by data limitations, including lack of data on mortgagor employment status. This paper studies mortgage default using PSID data, which includes a richer set of covariates, including employment status, equity, and other assets. In sharp contrast to prior studies, we find that unemployment and other negative financial shocks are key default predictors. Using wealth data, we find a limited scope for strategic default, as only 1/3 of underwater defaulters have enough assets to pay their mortgage. We discuss the implications of these findings for theoretical default models and for loss mitigation policies
September 2015The Impact of Foreclosure Delay on U.S. Employment
with Lee E. Ohanian: w21532
This paper documents that the time required to initiate and complete a home foreclosure rose from about 9 months on average prior to the Great Recession to an average of 15 months during the Great Recession and afterward. We refer to these changes as foreclosure delay. We also document that many borrowers who are in foreclosure ultimately exit foreclosure and keep their homes by making up for missed mortgage payments. We analyze the impact of foreclosure delay on the U.S. labor market as an implicit credit line from a lender to a borrower (mortgagor) within a search model. In the model, foreclosure delay provides unemployed mortgagors with additional time to search for a high-paying job. We find that foreclosure delay decreases mortgagor employment by about 0.75 percentage points, nearly d...
August 2011Labor Market Dysfunction During the Great Recession
with Lee E. Ohanian: w17313
This paper documents the abnormally slow recovery in the labor market during the Great Recession, and analyzes how mortgage modification policies contributed to delayed recovery. By making modifications means-tested by reducing mortgage payments based on a borrower's current income, these programs change the incentive for households to relocate from a relatively poor labor market to a better labor market. We find that modifications raise the unemployment rate by about 0.5 percentage points, and reduce output by about 1 percent, reflecting both lower employment and lower productivity, which is the result of individuals losing skills as unemployment duration is longer.

Published: “Labor Market Dysfunction during the Great Recession,” with Lee E. Ohanian (UCLA), Cato Papers on Public Policy, edited by Jeffrey Miron, Volume 1, 2011.

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us