Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default Can't Pay or Won't Pay? Unemployment, Negative Equity, and Strategic Default

By Kristopher S. Gerardi, Kyle F. Herkenhoff, Lee E. Ohanian, and Paul S. Willen

The authors exploit new data from the Panel Study of Income Dynamics (PSID) to provide a more systematic and detailed analysis of household-level employment, income, and expense shocks to mortgage default decisions than has been possible before. These new data provide very different answers regarding the importance of employment and financial factors in the decision to default on a mortgage than have been found in previous studies that were based on crude proxies for household-level financial variables.

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