Search Results
Working Paper
For Better and for Worse? Effects of Access to High-Cost Consumer Credit
I provide empirical evidence that the effect of high-cost credit access on household material well-being depends on if a household is experiencing temporary financial distress. Using detailed data on household consumption and location, as well as geographic variation in access to high cost payday loans over time, I find that payday credit access improves wellbeing for households in distress by helping them smooth consumption. In periods of temporary financial distress?after extreme weather events like hurricanes and blizzards?I find that payday loan access mitigates declines in spending on ...
Working Paper
Confidence, Financial Literacy and Investment in Risky Assets: Evidence from the Survey of Consumer Finances
We employ recent Survey of Consumer Finances (SCF) microdata from the US to analyze the impacts of confidence in one’s own financial knowledge, confidence in the economy, and objective financial literacy on investment in risky financial assets (equity and bonds) on both the extensive and intensive margins. Controlling for a rich set of covariates including risk aversion, we find that objective financial literacy is positively related to investment in risky assets as well as debt securities. Moreover, confidence in own financial skills additionally increases the probability of holding risky ...
Working Paper
Medical Expenses and Saving in Retirement: The Case of U.S. and Sweden
Many U.S. households have significant wealth late in life, contrary to the predictions of a simple life-cycle model. In this paper, we document stark differences between U.S. and Sweden regarding out-of-pocket medical and long-term-care expenses late in life, and use them to investigate their role in discouraging the elderly from dissaving. Using a consumption-saving model in retirement with significant uninsurable expense risk, we find that medical expense risk accounts for a quarter of the U.S.-Sweden difference in retirees' dissaving patterns. Furthermore, medical expense risk affects ...
Working Paper
Growing Up without Finance
Early-life exposure to local financial institutions increases household financial inclusion and leads to long-term improvements in consumer credit outcomes. We identify the effect of local financial markets using congressional legislation that led to large and unintended differences in financial market development across Native American reservations. Individuals who grow up on financially underdeveloped reservations enter formal credit markets later than individuals from financially developed reservations and have persistently worse consumer credit outcomes (10 point lower credit scores and a ...
Working Paper
Implications of Student Loan COVID-19 Pandemic Relief Measures for Families with Children
The initial years of the COVID-19 pandemic and the resulting economic fallout likely posed particular financial strain on U.S. households with children, who faced income disruptions from widespread jobs and hours cuts in addition to new childcare and instruction demands. One common expense for many such households is their student loan payment. The Coronavirus Aid, Relief, and Economic Security (CARES) Act included provisions to curb the impacts of these payments, which have been extended several times. These measures were not targeted and thus applied independent of need. This chapter ...
Working Paper
Who is a Passive Saver Under Opt-In and Auto-Enrollment?
Defaults have been shown to have a powerful effect on retirement saving behavior yet there is limited research on who is most affected by defaults and whether this varies based on features of the choice environment. Using administrative data on employer-sponsored retirement accounts linked to survey data, we estimate the relationship between retirement saving choices and individual characteristics ? long-term discounting, present bias, financial literacy, and exponential-growth bias ? under two distinct choice environments: an opt-in regime and an auto-enrollment regime. Consistent with our ...
Working Paper
Debt collection agencies and the supply of consumer credit
Superseded by Working Paper 15-23 I examine contract enforcement in consumer credit markets by studying the role of third-party debt collectors. In order to identify the effect of debt collectors on credit supply, I construct a state-level index of the tightness of debt collection laws. I find that stricter regulations of third-party debt collectors are associated with a lower number of third-party debt collectors per capita and with fewer openings of revolving lines of credit. One additional restriction on debt collection activity reduces the number of debt collectors per capita by 15.9% of ...
Working Paper
Who Pays For Your Rewards? Redistribution in the Credit Card Market
We study credit card rewards as an ideal laboratory to quantify redistribution between consumers in retail financial markets. Comparing cards with and without rewards, we find that, regardless of income, sophisticated individuals profit from reward credit cards at the expense of naive consumers. To probe the underlying mechanisms, we exploit bank-initiated account limit increases at the card level and show that reward cards induce more spending, leaving naive consumers with higher unpaid balances. Naive consumers also follow a sub-optimal balance-matching heuristic when repaying their credit ...