Home Equity and Labor Income : The Role of Constrained Mobility

Using detailed data for homeowners in the U.S., we document a negative, non-linear relation between the loan-to-value ratio (LTV) of the primary residence and labor income. Consistent with constrained mobility for high LTV individuals, we find stronger effects among sub-prime, liquidity constrained individuals and those living in regions with limited local alternate employment opportunities and strict non-compete law enforcement. Though high LTV individuals are less likely to move residences across MSAs, they are more likely to change jobs without changing their residence. We find no effects among similar neighboring renters employed at the same firm with similar job tenure