Refinancing cross-subsidies in the mortgage market
Fisher, J., Gavazza, A.
, Liu, L., Ramadorai, T. & Tripathy, J.
(2024).
Refinancing cross-subsidies in the mortgage market.
Journal of Financial Economics,
158,
https://doi.org/10.1016/j.jfineco.2024.103876
, Liu, L., Ramadorai, T. & Tripathy, J.
(2024).
Refinancing cross-subsidies in the mortgage market.
Journal of Financial Economics,
158,
https://doi.org/10.1016/j.jfineco.2024.103876
In household finance markets, inactive households can implicitly cross-subsidize active households who promptly respond to financial incentives. We assess the magnitude and distribution of cross-subsidies in the mortgage market. To do so, we build a structural model of household mortgage refinancing and estimate it on rich administrative data covering the stock of outstanding mortgages in the UK. We estimate sizeable cross-subsidies that flow from relatively poorer households and those located in less-wealthy areas towards richer households and those located in wealthier areas. Our work highlights how the design of household finance markets can contribute to wealth inequality.
Explore Further
- G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G00 - General
- N20 - General, International, or Comparative
- R21 - Housing Demand
- R31 - Housing Supply and Markets
- L51 - Economics of Regulation
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Tripathy, J.
Gavazza, A., Fisher, J., Liu, L. & Ramadorai, T.
(2024).
Refinancing Cross-Subsidies in the Mortgage Market.
[Dataset]. Mendeley Data.
https://doi.org/10.17632/hy29cy2v9f
