The mortgage default decision is part of a complex household credit management problem. We examine how factors affecting mortgage default spill over to other credit markets. As home equity turns negative, homeowners default on mortgages and HELOCs at higher rates, whereas they prioritize repaying credit cards and auto loans. Larger unused credit card limits intensify the preservation of credit cards over housing debt. Although mortgage non-recourse statutes increase default on all types of housing debt, they reduce credit card defaults. Foreclosure delays increase default rates for both housing and non-housing debts. Our analysis highlights the interconnectedness of debt repayment decisions.

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The choice between a set of alternatives often depends on how those alternatives are described, as well as their actual economic costs and benefits. We report results from an experiment designed to evaluate the impact of different descriptions of the after-tax wage on both (1) subjects' willingness to perform a work task rather than an alternative leisure option, and (2) the amount of work performed by those subjects selecting the work task. Utilizing an experimental design that facilitates both within and between-subject comparisons, we find that that subjects' willingness to work varies with the framing of the after-tax wage and that, in particular, subjects are much less willing to work when the returns to work are framed as a low wage plus a bonus than when the returns are described as a high wage minus a tax. Along the intensive margin we find suggestive evidence that subjects stop working just before their wage becomes subject to a significantly higher marginal tax rate, but we do not observe similar clustering when gross wages become subject to an equivalent wage decrease that is not described as a tax increase.Page 3 of 32 IntroductionA standard assumption in public economics research is that agents fully optimize with respect to the actual economic tradeoffs that they face, perfectly calculating the after-tax prices of the consumption, investment, and work alternatives available to them and maximizing their utility given those prices (Chetty 2009). A corollary of this assumption is that the formal description of these prices does not affect agents' choices. At the same time, it is well-known that preferences may be context-dependent and affected by the way that choices are described or "framed." For example, a number of recent studies suggest that individuals fail to fully incorporate the effects of taxes into their evaluation of market alternatives when those effects are made less salient by the framing of the decision.1 If behavioral responses to prices are dependent on framing, including whether the effects of taxes are more or less salient, then this has profound consequences for tax policy because it implies that the distortionary effects of taxes on individual behavior and the attendant negative welfare consequences are not just a function of the taxes themselves, but also of how they are implemented and described. To this end, research on tax framing and salience may guide the way toward increasing the efficiency of taxation.However, while there are a growing number of empirical studies of the effects of tax framing on individual behavior, these are mainly restricted to evaluations of the effects on consumer purchasing decisions ), Finklestein (2009, Gallagher and Muehlegger (2008), Ott and Andrus (2000)) and, due to data limitations, the effect of framing on labor supply decisions has been largely unexplored. 2 In this paper, we report evidence from an experiment designed to test whether variation in the framing of the after-tax wage affects (1) subjects' willingness to select a "work" ...

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe mortgage default decision is part of a complex household credit management problem. We examine how factors affecting mortgage default spill over to other credit markets. As home equity turns negative, homeowners default on mortgages and HELOCs at higher rates, whereas they prioritize repaying credit cards and auto loans. Larger unused credit card limits intensify the preservation of credit cards over housing debt. Although mortgage non-recourse statutes increase default on all types of housing debt, they reduce credit card defaults. Foreclosure delays increase default rates for both housing and non-housing debts. Our analysis highlights the interconnectedness of debt repayment decisions.