The Effects of Negative Equity on Children's Educational Outcomes

57 Pages Posted: 8 Feb 2021 Last revised: 18 Nov 2021

See all articles by Vicki Been

Vicki Been

New York University School of Law

Ingrid Gould Ellen

New York University (NYU) - Robert F. Wagner Graduate School of Public Service

David Figlio

Northwestern University

Ashlyn Aiko Nelson

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Stephen L. Ross

University of Connecticut - Department of Economics

Amy Schwartz

Syracuse University

Leanna Stiefel

New York University (NYU) - Robert F. Wagner Graduate School of Public Service

Date Written: February 2021

Abstract

This study examines the effects of negative equity on children’s academic performance, using data on children attending Florida public schools and housing transactions from the State of Florida. Our empirical strategy exploits variation over time in the timing of family moves to Florida in order to account for household sorting into neighborhoods and schools and selection into initial mortgage terms. In contrast to the existing literature on foreclosure and children’s outcomes, we find that Florida students with the highest risk of negative equity exhibit significantly higher test score growth. These effects are largest among Black students and students who qualify for free or reduced-priced lunch. We find evidence supporting two underlying mechanisms: (1) consumption patterns suggest that families in negative equity may reduce the impact of income losses on consumption by forgoing mortgage payments, and (2) mobility patterns suggest that families exposed to high levels of negative equity may move to schools that are of higher quality on average. While negative equity and foreclosure are undesirable, the changing incentives in terms of mortgage delinquency may have helped families manage the economic shocks caused by the great recession, as well as temporarily reduced the housing market barriers faced by low income households when attempting to access educational opportunities.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Been, Vicki and Ellen, Ingrid Gould and Figlio, David and Nelson, Ashlyn Aiko and Ross, Stephen L. and Schwartz, Amy and Stiefel, Leanna, The Effects of Negative Equity on Children's Educational Outcomes (February 2021). NBER Working Paper No. w28428, Available at SSRN: https://ssrn.com/abstract=3781315 or http://dx.doi.org/10.2139/ssrn.3781315

Vicki Been (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States
212-998-6223 (Phone)
212-995-4341 (Fax)

Ingrid Gould Ellen

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

David Figlio

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Ashlyn Aiko Nelson

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Stephen L. Ross

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

Amy Schwartz

Syracuse University

Leanna Stiefel

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

Public and Nonprofit Management and the Policy Pro
4 Washington Square North
New York, NY 10003
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
4
Abstract Views
77
PlumX Metrics