It Takes Two to Borrow: The Effects of the Equal Credit Opportunity Act on Housing, Credit, and Labor Market Decisions of Married Couples

Abstract

Until the 1970s, U.S. mortgage lenders commonly discounted half of the wife’s income in couples’ joint mortgage applications. This changed with the introduction of antidiscrimination legislation in the 1970s, providing a natural experiment to study the relaxation of income-related borrowing constraints. I study the effects of the reform by estimating difference-in-differences regressions and solving a simple calibrated life cycle model. I find substantial positive effects of the reform on mortgage borrowing and homeownership rates of married couples with working wives. Moreover, I find a positive effect on married womens labor force participation, which strongly amplifies the homeownership and borrowing effects.