Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339484 
Year of Publication: 
2025
Series/Report no.: 
IFS Working Papers No. 25/13
Publisher: 
The Institute for Fiscal Studies (IFS), London
Abstract: 
We study how house price shocks affect marital stability and household labor supply. We address this question using a dynamic collective household model with limited commitment. We find that positive house price shocks increase the divorce rate, and that leverage ratios such as loan-to-income (LTI) and loan-to- value (LTV) determine the transmission of house price shocks on divorce. Given its importance, we then analyze a tightening of the credit market through the LTI-limit. We show that neglecting the divorce and intra-household bargaining channels significantly biases the individual welfare effects of such policies.
Subjects: 
Limited commitment
housing demand
labor supply
creditmarket policy
JEL: 
D14
D15
J12
J22
K36
R21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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