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Discussion Paper Details

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Title: Housing, Mortgages, and Self Control

Author(s): Kathrin Schlafmann

Publication Date: October 2016

Keyword(s): Commitment Device, Housing, Mortgages, Self Control and Temptation

Programme Area(s): Monetary Economics and Fluctuations

Abstract: Using a quantitative theoretical framework this paper analyzes how problems of self control influence housing and mortgage decisions. The results show that people with stronger problems of self control are less likely to become home owners, even though houses serve as commitment for saving. The paper then investigates the welfare effects of regulating mortgage products if people differ in their degree of self control. Higher down payment requirements and restrictions on prepayment turn out to be beneficial to people with sufficiently strong problems of self control, even though these policies further restrict access to the commitment device.

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Bibliographic Reference

Schlafmann, K. 2016. 'Housing, Mortgages, and Self Control'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11589