We study the impact of borrower protection on mortgage and housing demand using variation in the likelihood that houses are repossessed coming from heterogeneity in preferences of local judges. We develop a framework that provides conditions to identify the impact of repossession risk on housing and credit demand ? holding supply fixed. Empirically, we exploit exogenous variation in risk created by boundaries of courts? catchment areas. We find that one standard deviation decrease in borrower protection decreases borrowing and house prices by 4.5%.

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29 January 2025

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The Economic Journal 2025

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DOI: 10.1093/ej/ueaf006

https://academic.oup.com/ej/advance-article/doi/10.1093/ej/ueaf006/7989453

This Journal article is published under the centre's Urban programme, Education programme, Neighbourhoods programme.

This publication comes under the following theme: Housing