NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Rose Tan

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Stanford University

NBER Working Papers and Publications

June 2020The Effect of Foreclosures on Homeowners, Tenants, and Landlords
with Rebecca Diamond, Adam Guren: w27358
How costly is foreclosure? Estimates of the social cost of foreclosure typically focus on financial costs. Using random judge assignment instrumental variable (IV) and propensity score matching (PSM) approaches in Cook County, Illinois, we find evidence of significant non-pecuniary costs of foreclosure, particularly for foreclosed-upon homeowners. For all homeowners (IV and PSM), foreclosure causes housing instability, reduced homeownership, and financial distress. For marginal homeowners (IV) but not average homeowners (PSM), foreclosure also causes moves to worse neighborhoods and elevated divorce. We show that the difference between IV and PSM is due to treatment effect heterogeneity: marginal homeowners have more to lose than average homeowners. We find similar financial costs for land...
 
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