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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
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
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
Credit Scores and Committed Relationships
This paper presents novel evidence on the role of credit scores in the dynamics of committed relationships. We document substantial positive assortative matching with respect to credit scores, even when controlling for other socioeconomic and demographic characteristics. As a result, individual-level differences in access to credit are largely preserved at the household level. Moreover, we find that the couples' average level of and the match quality in credit scores, measured at the time of relationship formation, are highly predictive of subsequent separations. This result arises, in part, ...
Working Paper
Trends in Household Portfolio Composition
We use data from the Survey of Consumer Finances (SCF) to explore how household asset portfolios in the United States have evolved from 1989 to 2016. Throughout this period, two key assets?housing and financial market assets?have driven the aggregate household balance sheet evolution. However, aggregates mask great heterogeneity in balance sheet composition across the wealth distribution, and most families hold a relatively small share of assets in financial markets and larger shares in housing and other nonfinancial assets. We also describe the typical life cycle asset accumulation processes ...
Working Paper
Borrowers in Search of Feedback : Evidence from Consumer Credit Markets
We study recent technological innovation in credit markets and document their role in providing information to households. We show that households value the ability to learn detailed information about their cost of credit. This function is most valued by less creditworthy households with less experience in credit markets. To measure the demand for information provision we exploit a quasi-natural experiment in an online consumer credit market. A large lending platform unexpectedly switched from pricing loans through an auction mechanism to centralized pricing determined by broad credit grade. ...
Working Paper
The Credit Card Act and Consumer Finance Company Lending
The Credit Card Accountability and Disclosure Act (CARD Act) of 2009 restricted several risk management practices of credit card issuers. Using a quasi-experimental design with credit bureau data on consumer lending, we find evidence consistent with the hypothesis that the act??s restrictions on risk management practices contributed to a large decline in bank card holding by higher risk, nonprime consumers but had little effect on prime consumers. Looking at consumer finance loans, historically a source of credit for higher risk consumers, we find greater reliance on such loans by nonprime ...
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
Owner occupancy fraud and mortgage performance
We use a matched credit bureau and mortgage data set to identify occupancy fraud in residential mortgage originations, that is, borrowers who misrepresented their occupancy status as owner occupants rather than residential real estate investors. In contrast to previous studies, our data set allows us to show that such fraud was broad based, appearing in the government-sponsored enterprise market and in loans held on bank portfolios as well. Mortgage borrowers who misrepresented their occupancy status performed worse than otherwise similar owner occupants and declared investors, defaulting at ...
Working Paper
Should defaults be forgotten? Evidence from variation in removal of negative consumer credit information
Practically all industrialized economies restrict the length of time that credit bureaus can retain borrowers? negative credit information. There is, however, a large variation in the permitted retention times across countries. By exploiting a quasi-experimental variation in this retention time, we investigate what happens when negative information is deleted earlier from credit files. We find that the loss of information led banks to tighten their lending standards significantly as the expected retention time was diminished from on average three-and-a-half to three years exactly. ...