I study how households borrow, work and cope with debt, and what that means for firms, labour markets and mental health. I am Professor of Finance at VU Amsterdam, Associate Professor and Deputy Director at the Swedish House of Finance, Stockholm School of Economics, and a Research Fellow at CEPR and the Tinbergen Institute.
Employee Debt Overhang and Firm Performance with Ramin Baghai and Paula Roth Selected for FRA 2026, FOM 2026, Labor Finance Group 2026 (Nashville) and CEPR-CSEF Labor and Finance 2026 (Capri) Abstract
Enforcement of household debt supports credit supply, but may also weaken borrowers’ work incentives and affect the performance of the firms that employ them. We study employee debt overhang under wage garnishment in Sweden, where earnings above a protected subsistence threshold are remitted to creditors. Exploiting quasi-random variation in enforcement timing, we find that workers bunch earnings at the protected threshold: monthly earnings fall by 5%, unemployment and sickness absence rise, and promotions decline by 27%. Earnings reductions are larger among workers with high debt relative to income, consistent with weaker incentives over long repayment horizons. Coworkers partly offset the withdrawal of labor by working longer hours, but experience higher sickness absence and more hospital contacts, with some evidence of increased psychotropic medication use. Exposed firms nevertheless experience a reduction in value added and sales, as well as higher exit rates, with effects most visible among small firms and firms with weak balance sheets before exposure. Earnings rise following a 2022 reform that increased protected income thresholds while leaving garnishment status and employer notification unchanged, supporting an incentive channel. These findings identify workplace costs of debt enforcement that extend beyond the debtor; such consequences of debt enforcement should be considered alongside its benefits for credit markets.
On the Origins of Financial Distress with Elin Molin, Erik Plug, Paula Roth and Kasper Roszbach Selected for EFA 2025, the Luxembourg Household Finance and Consumption Workshop and the HOFIMAR workshop Abstract
Financial distress has severe consequences for individuals and families, yet its intergenerational transmission remains poorly understood. Using rich administrative data from Sweden, we examine why children whose parents experience financial distress are more likely to face similar challenges themselves. Using an adoption design that separates pre-birth from post-birth influences, we find that both matter. The post-birth family environment is, however, more than three times as strongly associated with children’s financial distress as pre-birth factors. Our mediation analysis further shows that low liquid assets play a key role in this post-birth transmission. Our findings underscore the importance of family environments on financial hardship and highlight the potential of targeted policies to break the cycle of intergenerational financial distress.
Financing the Transition: How Green Loans Reshape Household Finances and Emissions with Navid Akbaripour, Ehsan Mahdikhani and Arna Olafsson Abstract
Using transaction-level bank data, we exploit the introduction of a discounted green car loan and random lottery windfalls as natural experiments to identify how electric-vehicle (EV) adoption financed by green loans affects household finances and emissions. Households that finance an EV with a green loan reduce gasoline spending by about 30% and raise electricity spending by about 26%, cutting total vehicle energy costs by roughly 22% (about $34 per month) and lowering gasoline use by about 22 liters per month, or 50 to 60 kg of CO2. These household-level gains are real rather than displaced: adopters replace a gasoline car rather than add a second vehicle, and we find no rebound in driving or other carbon-intensive spending. Their aggregate reach, however, is bounded by who adopts. Take-up is highly selective, concentrated among affluent and already-green households rather than the heaviest drivers, so the program largely finances a switch among households already inclined to make it. Random lottery wins reveal latent demand beyond this group: a cash windfall raises EV purchases via green loans by 20 percentage points, even among consumers with no prior environmental leanings, indicating that liquidity constraints, not preferences, keep many others out. Preferential green credit can thus deliver complementary climate and financial benefits, but its impact on aggregate emissions depends on extending access beyond the already-green and well-capitalized.
Quid Pro Quo: Life Insurance Choices of Spouses with Wenli Li and Jenny Säve-Söderbergh Abstract
Women are more likely than men to experience poverty in later years, underscoring the importance of spousal life insurance in mitigating financial vulnerability. This research explores the factors influencing decisions regarding spousal life insurance, drawing on comprehensive administrative data from Sweden. A key finding is that while 35% of men opt to reduce their pension benefits to ensure their spouses’ financial security upon their death, a notable 22% of women also choose this option, despite being generally younger and having lower pension incomes than their spouses. Moreover, women are much more likely than men to make coverage decisions that mirror those of their retired partners. Through the study of a quasi-policy experiment, alongside a survey exploring individual motivations and expectations, we reveal that women prioritize reciprocity greatly. This emphasis significantly influences their insurance selection decisions. Using an equilibrium model calibrated to Swedish data on spousal life insurance decisions, we perform counterfactual simulations and demonstrate that reciprocity explains roughly half of women’s insurance choices. This reciprocity lowers their consumption-equivalent welfare, and it does so more than it does for their partners.
News
Upcoming talks
4 November 2026 Philadelphia Fed, Consumer Finance Institute seminar Employee Debt Overhang and Firm Performance
5 December 2026 Financial Research Association, 22nd Annual Meeting, Las Vegas Employee Debt Overhang and Firm Performance
Recent grants
2025 Swedish Research Council (Vetenskapsrådet), 3.7 MSEK Economic Rehabilitation and Crime: The Crime-Preventive Potential of Debt Relief, with Elin Molin, Johanna Rickne and Paula Roth
2025 Forte, 3.3 MSEK Debt Forgiveness as Suicide Prevention, with Helle Mölsted Alvesson and Paula Roth
2024 Jan Wallander and Tom Hedelius Foundation, 2 MSEK Understanding Over-indebtedness: New Data, Causes, Consequences and Policy, with Paula Roth and Elin Molin
CEPR Household Finance Seminar Series. Katrin Schlafmann and I organize this online series, once a month. Register and join.
Women in Finance Database. The Swedish House of Finance database now covers five years, tracking the share of women in the world’s top 100 finance departments and the top 50 in the EU.
We study employee mental health as a non-monetary measure of the long-term effects of mergers. Using employer-employee level data linked to individual health records, we document that the incidence of stress, anxiety, depression, and psychiatric medication usage increased following mergers. These effects are prevalent among employees from both targets and acquirers, in weak as well as in growing, profitable firms. Employees who experience negative career developments within the merging firms, ’blue-collar’ workers and employees with lower skills are most affected. Mergers that generate more mental illness among employees perform worse post-transaction. A variety of tests address endogeneity concerns.
Increased availability of alcohol might harm individuals if they have time-inconsistent preferences and consume more than planned before. We study this idea by examining the credit behavior of low-income households around the expansion of the opening hours of retail liquor stores during a nationwide experiment in Sweden. Consistent with store closures serving as commitment devices, expanded operating hours led to higher alcohol consumption and greater consumer credit demand, default, and negative consequences in the labor market. Our calculation shows that the effects of alcohol consumption on indebtedness could amount to 3.2 times the expenditure on alcohol.
This paper documents that high-educated borrowers choose a lower loan to value ratio when their budget constraints are exogenously tighter. In contrast, low-educated borrowers do not respond to temporarily elevated levels of scarcity. This lack of response translates into a significantly higher probability of default and an 11.6 percent increase in borrowing costs. We show that a difference in access to liquidity and/or buffer stocks cannot explain our results. Instead, a framework where the awareness of self-control problems is positively correlated with education explains why high-educated, but not low-educated, consumers choose a lower LTV as a commitment device. Our findings highlight that increased levels of scarcity risk reinforce the conditions of poverty.
Bad Times, Good Creditwith Bo Becker and Kasper Roszbach Journal of Money, Credit and Banking, 52, 2020, 107–142 Abstract
Banks’ limited knowledge about borrowers’ creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit, or is the depth of the friction reduced, as bad times reveal information about firm quality? We test these alternative hypotheses using internal rating data from a large Swedish cross-border bank and credit scores from a credit bureau. The ability to classify corporate borrowers by credit quality is greater during bad times and worse during good times. Soft and hard information measures both display countercyclical patterns. Our results suggest that information frictions in corporate credit markets are intrinsically counter-cyclical and not due to cyclical variation in monitoring effort.
Attention-deficit/hyperactivity disorder (ADHD) exerts lifelong impairment, including difficulty sustaining employment, poor credit, and suicide risk. To date, however, studies have assessed selected samples, often via self-report. Using mental health data from the entire Swedish population (N = 11.55 million) and a random sample of credit data (N = 189,267), we provide the first study of objective financial outcomes among adults with ADHD, including associations with suicide. Controlling for psychiatric comorbidities, substance use, education, and income, those with ADHD start adulthood with normal credit demand and default rates. However, in middle age, their default rates grow exponentially, yielding poor credit scores and diminished credit access despite high demand. Sympathomimetic prescriptions are unassociated with improved financial behaviors. Last, financial distress is associated with a fourfold higher risk of suicide among those with ADHD. For men but not women with ADHD who suicide, outstanding debt increases in the 3 years prior. No such pattern exists for others who suicide.
The Labor Market Effects of Credit Market Informationwith Emily Breza and Andres Liberman The Review of Financial Studies, 31(6), June 2018, 2005–2037 Editor’s Choice 2018 · Michael J. Brennan Best Paper Award 2019 Abstract
We exploit a natural experiment to provide one of the first measurements of the causal effect of negative credit information on employment and earnings. We estimate that one additional year of negative credit information reduces employment by 3 percentage points and wage earnings by $1,000. In comparison, the decrease in credit is only one-fourth as large. Negative credit information also causes an increase in self-employment and a decrease in mobility. Further evidence suggests this cost of default is inefficiently borne by those most creditworthy among previous defaulters.
Sidelined in Science
A short film about the science behind the roadblocks to women’s academic careers in (financial) economics, with a companion video in which the authors set out policy recommendations.
Trailer
The film (20 min)
Policy recommendations (17 min)
With Emily Breza and Itay Goldstein at the SFS Cavalcade 2019, Pittsburgh, and Andres Liberman in front of NYU Stern.
