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Working Paper
Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment
We exploit the 1998 and 2003 constitutional amendment in Texas—allowing home equity loans and lines of credit for non-housing purposes—as natural experiments to estimate the effect of easier credit access on the labor market. Using state-level as well as micro data and the synthetic control approach, we find that easier access to housing credit led to a notably lower labor force participation rate between 1998 and 2007. We show that our findings are remarkably robust to improved synthetic control methods based on insights from machine learning. We explore treatment effect heterogeneity ...
Working Paper
Payments Crises and Consequences
Banking-system shutdowns during contractions scar economies. Four times in the lastforty years, governors suspended payments from state-insured depository institutions. Suspensionsof payments in Nebraska (1983), Ohio (1985), and Maryland (1985), which wereshort and occurred during expansions, had little measurable impact on macroeconomic aggregates.Rhode Island’s payments crisis (1991), which was prolonged and occurred duringa recession, lengthened and deepened the downturn. Unemployment increased. Outputdeclined, possibly permanently relative to what might have been. We document these ...
Working Paper
Labor Market Effects of Credit Constraints: Evidence from a Natural Experiment
We exploit the 1997 and 2003 constitutional amendments in Texas—allowing home equity loans and lines of credit for non-housing purposes—as natural experiments to estimate the effect of easier credit access on the labor market. Using state-level as well as micro data and the synthetic control approach, we find that easier access to housing credit led to a 1.2 percentage point average decline in the labor force participation rate between 1997 and 2007. We show that our findings are remarkably robust to improved synthetic control methods based on insights from machine-learning. We also find ...