Abstract
We analyze the effect of import competition on household balance sheets using individual data on consumer finances. We exploit variation in local industry exposure to foreign competition to study households' response to the income shock triggered by China's accession to the World Trade Organization. We show that household debt increases significantly in regions where manufacturing industries are more exposed to import competition. The effects are driven by home equity extraction and are concentrated in areas with strong house price growth. Our results highlight the role played by mortgage markets in absorbing displacement shocks triggered by globalization.
Original language | English (US) |
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Pages (from-to) | 3037-3091 |
Number of pages | 55 |
Journal | Journal of Finance |
Volume | 77 |
Issue number | 6 |
DOIs | |
State | Published - Dec 2022 |
Bibliographical note
Funding Information:Open Access Funding provided by Universita Bocconi within the CRUI-CARE Agreement. Editors: Stefan Nagel, Philip Bond, Amit Seru, and Wei Xiong.
Publisher Copyright:
© 2022 The Authors. The Journal of Finance published by Wiley Periodicals LLC on behalf of American Finance Association.