Nominal loss aversion, housing equity constraints, and household mobility: evidence from the United States

Abstract

This paper exploits the recent variation in US house prices to examine the effect of equity constraints and nominal loss aversion on household mobility. Detailed data from the 1985–1996 National Longitudinal Survey of Youth (NLSY79) were matched with house price data from 149 metropolitan areas to estimate instrumental variables linear probability and semi-parametric proportional hazard models of intra-metropolitan mobility. Household mobility is significantly influenced by nominal loss aversion. There is little evidence that low equity because of fallen house prices constrains mobility.