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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

Research

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

Presentation

If amortization payments are a cost for borrowers, such payments should affect credit demand. Contrary to common perception, we argue that forced amortization payments are costly in a number standard models and use notches in the Swedish amortization requirement to estimate the amortization elasticity of mortgage demand. A percentage point increase in amortization payments reduce LTV ratios by 2-3 percentage points, implying a sizable amortization elasticity of mortgage demand. We show that borrowers who seek to avoid making payments generally have higher debt, higher income and higher debt-to-income ratios. We discuss the implications for macro-prudential policy and for explaining aggregate and cross-sectional debt growth prior to the Great Recession.

House price growth before and after IO mortgages are introduced

Mortgage innovations and House price booms

with Chandler Lutz

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

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.

Higher exposure to IO mortages predict higher consumption growth

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

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.

Participation and Losses in Multi-Level Marketing: Evidence from an FTC Settlement with Tobin Hanspal

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 participation is greater in areas with higher median income and where women are absent from the labor market, suggesting value in flexible work. However, losses are correlated with higher inequality and lower social capital, suggesting that the pitfalls accrue to vulnerable groups.