Carnegie Mellon University

Deeksha Gupta

March 12, 2021

After a Year of COVID-19, Finance Expert Shares Learnings on Debt Burdens and Infection

The coronavirus shook the world, accelerating changes in education and technology, disrupting models in business and entertainment, and fundamentally redefining how work gets done.

CMU experts shared their thoughts on the best applications for advancements made in the past year, preparations for a post-pandemic landscape, and how lessons learned can inform the future. Below, Deeksha Gupta, Assistant Professor of Finance, shared what she learned about how mortgage debt burdens make households vulnerable to infections during the pandemic.

Debt Burdens and Infection

One of my primary areas of focus is how the housing market interacts with various economic crises. Most recently I've been researching how mortgage debt burdens make households vulnerable to infections during the pandemic.

Inequality has been exacerbated by COVID-19. My co-author, Tetiana Davydiuk, and I have researched how mortgage debt burdens affected mobility patterns (the distance one travels from home each day) before and after the start of the pandemic.

The mobility of higher-income households dropped significantly more than the mobility of lower-income households after March 15, when the pandemic started to pick up in the U.S. We provide evidence that mortgage debt burdens contribute to this inequality in households' ability to reduce mobility. This relation may be driven by the stress lower-income earners face of maintaining wages to meet their mortgage payments, thus forcing them to endure more potential exposure to coronavirus.

If a household is relatively constrained, a greater portion of their wages is going toward their mortgage payments, and the financial stress of an income shock can be devastating. Earners without such constraints are more effectively able to protect themselves from being infected with the virus.

Besides the differential stress of mortgage burdens on rich and poor households, the pandemic has also highlighted many other dimensions of inequality in society. For example, richer neighborhoods are getting vaccinated at higher rates even though poorer neighborhoods have experienced higher rates of infection.

Following the Great Depression, the U.S. made structural changes to the way it regulated banks, such as the introduction of deposit insurance, in an attempt to protect American citizens. Now, COVID-19 has brought many inequalities to light and has pushed policymakers to take action. By mailing out stimulus checks, a policy idea similar to universal basic income, the U.S. is undertaking relatively uncharacteristic welfare policies.

This past year has seen the implementation of programs trying to increase the safety net for average people. For now, they are short-term and temporary programs. But these issues of inequality have become so salient during the pandemic that we may see a stronger welfare state going forward, even after the pandemic. Perhaps we will see a move toward universal basic income or policies that guarantee federal jobs for any American.