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I am an Assistant Professor at the Department of Economics and Business Economics at Aarhus University and an affiliate of Knut Wicksell Centre for Financial Studies at Lund University. My research is in the intersection of finance and macroeconomics, where I use microdata to study consumption, housing and mortgages. I also do work in alternative work arrangements and in the effect of social networks on investment behaviour.

You can find a list of resources that are useful for being a researcher here, what you might call the hidden curriculum. These are the things that are not usually taught in a PhD program but that are essential to conducting research. This includes material on improving writing skills, how to organize a project, how to present your work, and lots of other practical issues. You can also look at a small presentation for PhD students that summarizes my thinking a bit.

If you have any links that would be useful for PhD students or junior researchers, please let me know!

Contact information

claes.backman@econ.au.dk

News:

  • My paper with Tobin Hanspal about Multilevel marketing is now accepted at the Financial Planning Review

  • My paper with Peter van Santen about the Swedish amortization requirement was given a reject and resubmit at the Review of Financial Studies

  • We just launched a course in financial literacy for immigrants (in Swedish) at www.finanskurs.se. You can read more about the course in English here

  • I received a revise and resubmit at the International Economic Review for my paper with Natalia Khorunzhina on interest-only mortgages and consumption growth.

Research

Higher exposure to IO mortages predict higher consumption growth

Interest-Only Mortgages and Consumption Growth: Evidence from a Mortgage Market Reform with Natalia Khorunzhina

R&R at International Economic Review

We use detailed household-level data from Denmark to analyze how the introduction of interest-only mortgages affected consumption expenditure and borrowing. Four years after the reform interest-only mortgages constituted 40 percent of outstanding mortgage debt. Using an ex-ante measure of exposure motivated by financial constraints, we show households who are more likely to use an IO mortgage, increased consumption substantially following the reform. The increase in consumption is driven by borrowing at the time of refinancing and by borrowers with lower pre-reform leverage ratios. Our results show changes in the mortgage contract can have large impacts on consumption expenditure.

Large spike in distribution after the amortization requirement was introduced indicates that borrowers reduced their leverage to get lower payments

The Amortization Elasticity of Mortgage Demand - with Peter van Santen (Reject and resubmit at the Review of Financial Studies)

Presentation

We study the causal impact of amortization payments on household borrowing. We argue that forced amortization payments are costly in standard economic models and therefore affect credit demand. Exploiting notches in the Swedish amortization requirement, a macroprudential policy, we find that new borrowers reduce their loan-to-value ratios by 4-5 percent in response to a 1 percentage point higher amortization rate. We show that the effect is driven by lower borrowing and that a large share of borrowers lower amortization payments to avoid violating payment-to-income constraints. Our results are relevant for macroprudential policy and for understanding borrowers' mortgage choice.

House price growth before and after IO mortgages are introduced

Mortgage innovations and House price booms - with Chandler Lutz (Under review)

After previously trending downwards, Danish house prices increased 60 percent from 2003 to 2006. We study the genesis of this boom in a country with a similar mortgage finance system to the U.S., but where subprime mortgages were absent, regulatory loan-to-value ratios were unchanged, and there was no reallocation of credit towards low income borrowers. Results indicate that the rapid introduction of interest-only mortgages in 2003 ignited the boom and show that house price growth was higher in areas with higher ex-ante benefits of such mortgages. We conclude that seemingly small mortgage finance innovations can have large housing markets consequences.


No impact on homeownership rates after mortgage reform in 2003 (red line)

The Impact of IO Mortgages on Affordability - with Chandler Lutz

Regional Science and Urban Economics

We show that the legalisation of interest-only (IO) mortgage had no impact on homeownership rates in Denmark. IO mortgages made up approximately 60 percent of outstanding mortgage debt, with similar shares across the age, wealth and income distribution. We argue that the mortgage reform led to an increase in purchasing power across all buyers, leading to no change in who purchased housing. Instead, house prices rose, negating any positive impact on affordability.

Participation and Losses in Multi-Level Marketing: Evidence from an FTC Settlement with Tobin Hanspal. Financial Planning Review, forthcoming.

Published version, SSRN version

More than 20 million Americans are affiliated with Multi-Level Marketing firms (MLMs), but there is little empirical evidence on who participates in this controversial part of today's labor market. We link data on 350,000 individuals cited in an FTC settlement with one of the largest MLMs to detailed county-level information. We find that the share of refund claimants is greater in areas with higher median income and where women are absent from the labor market, suggesting value in flexible work. However, check amount, a proxy for losses, are correlated with higher inequality and lower social capital, suggesting that the pitfalls accrue to vulnerable groups.