Liquidity vs. Wealth in Household Debt Obligations: Evidence from Housing Policy in the Great Recession

This paper subsumes and extends a paper previously circulated as “The Effect of Debt on Default and Consumption: Evidence from Housing Policy in the Great Recession.” We thank Sumit Agarwal, David Berger, John Campbell, Raj Chetty, Gabriel Chodorow-Reich, Joao Cocco, John Coglianese, Marco Di Maggio, Will Dobbie, Jan Eberly, Avi Feller, Xavier Gabaix, John Geanakoplos, Edward Glaeser, Paul Goldsmith-Pinkham, Brett Green, Adam Guren, Sam Hanson, Nathan Hendren, Kyle Herkenhoff, Larry Katz, Rohan Kekre, Ben Keys, Arvind Krishnamurthy, David Laibson, Jens Ludwig, Yueran Ma, Laurie Maggiano, Neale Mahoney, Atif Mian, Kurt Mitman, Bill Murphy, Charles Nathanson, Elizabeth Noel, Christopher Palmer, Jonathan Parker, David Scharfstein, Therese Scharlemann, Antoinette Schoar, Amit Seru, Andrei Shleifer, Jon Spader, Jeremy Stein, Johannes Stroebel, Amir Sufi, Larry Summers, Adi Sunderam, Stijn Van Nieuwerburgh, Joe Vavra, Rob Vishny, Paul Willen, Owen Zidar, and Eric Zwick for helpful comments. We thank Guillermo Carranza Jordan, Chanwool Kim, and Jing Xian Ng for outstanding research assistance. Technical support was provided by the Research Technology Consulting team at Harvard’s Institute for Quantitative Social Science. This research uses outcomes calculated based on depersonalized credit data provided by TransUnion, a global information solutions company, through relationships with Harvard University and the University of Chicago Booth School of Business. This research was made possible by a data-use agreement between the authors and the JPMorgan Chase Institute (JPMCI), which has created de-identified data assets that are selectively available to be used for academic research. All statistics from JPMCI data, including medians, reflect cells with at least 10 observations. The opinions expressed are those of the authors alone and do not represent the views of JPMorgan Chase & Co or the National Bureau of Economic Research. While working on this paper, the authors were compensated for providing research advice on public reports produced by the JPMCI research team. We gratefully acknowledge funding from the Joint Center for Housing Studies, the Washington Center for Equitable Growth, the Hirtle Callaghan Fund, the Charles E. Merrill Faculty Research Fund at the University of Chicago Booth School of Business, and the National Bureau of Economic Research through the Alfred P. Sloan Foundation Grant No. G-2011-6-22 and the National Institute on Aging Grant No. T32-AG000186.

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