- ”Impulsive Consumption and Financial Wellbeing: Evidence from an Increase in the Availability of Alcohol”, The Review of Financial Studies, 2021, Volume 34, Issue 5, May 2021, Pages 2608–2647, Coauthor: Itzhak Ben-David, AbstractIncreased 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 serve 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.
- ”Scarcity and Consumers’ Credit Choice”, Theory and Decisions, 2021, Volume 91, Issue 5, May 2021, Pages , Coauthors: Chloe Le Coq and Peter van Santen, 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 cost. 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 reinforcing the conditions of poverty.
- “Bad Times, Good Credit”, Journal of Money, Credit, and Banking, 2020, 52: 107-142. Coauthors: Bo Becker and Kasper Roszbach AbstractBanks’ 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.
- ”Financial Distress and Suicide over the Lifecycle for Individuals with ADHD: A Population Study”, Science Advances, 2020, 6, no. 40: eaba1551. Coauthors: Theodore P. Beauchaine and Itzhak Ben-David. AbstractAttention-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 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 Information”, The Review of Financial Studies, June 2018, 31(6), 2005-2037, Editor’s Choice, Michael J. Brennan Best Paper Award 2019, Coauthors: Emily Breza and Andres Liberman. AbstractWe 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.
- Listen to an audio recording of our paper at Academic Audios
- ”How Do Acquisitions Impact the Mental Health of Employees?”, Coauthors: Laurent Bach Ramin Baghai, and Rui Silva. We study the evolution of workers’ mental health around corporate restructurings caused by takeovers. Using employer-employee level data linked to individual health records, we exploit failed mergers events to identify the impact of mergers on employees mental health. We document that the incidence of stress, anxiety, depression diagnosis, psychiatric medication usage, and even suicide increase following acquisitions. These effects are prevalent among employees from both the target and acquiring firms. They are more pronounced for employees that experience negative career developments within the merging firms, and for those who become unemployed. Women, ”blue-collar” workers, and employees with lower innate abilities (IQ and non-cognitive) are impacted the most. Our results are not solely driven by the economic distress of the firms in the pre-merger period (we find similar effects in growing, profitable target firms). The negative impact on the mental health of the average employee is of similar magnitude as the positive effect of marriage, but smaller than the effect of other marked events in workers’ lives, such as divorce and protracted unemployment. Our findings emphasize the human cost of financial transactions.
- ”Are We Overdiagnosing Mental Illness? Evidence from Randomly Assigned Doctors”, Coauthors: Andrew Hertzberg and Andres Liberman. More than one in ten adults in the U.S. and Europe are, at any moment in time, diagnosed with a mental illness. This paper asks whether mental illness is over (or under) diagnosed, by looking at its causal effect on individuals at the margin of diagnosis. We follow all Swedish men born between 1971 and 1983 matched to administrative panel data on health, labor, and wealth to estimate the impact of a mental illness diagnosis on subsequent outcomes. Exploiting the random assignment of 18-year-old men to doctors during military conscription, we find that a mental illness diagnosis for people at the margin increases the future likelihood of death, hospital admittance, being sick from work, and unemployment while lowering the probability of being married. Little of these harmful effects are caused by diagnosis altering the chance of serving in the military. Our findings are consistent with the potential over-diagnosis of mental illness.
- Watch our 2020 presentation at the NBER Summer Institute; Health Economics
June 2021: Our paper ”How Do Acquisitions Impact the Mental Health of Employees?”, is accepted to the 2022 AFA Annual Meeting in Boston January 7-9.
April 2021; Listen to our new podcast together with Sara Ottosson; Episode 5: Women in Finance Talk – More needs to be done to attract and attain female talent
December 2020; I was awarded the title ’Docent’ in Financial Economics by the Stockholm School of Economics.
2019: Our paper: ”The Labor Market Effects of Credit Market Information” in the Review of Financial Studies, received the Michael J.Brennan Best Paper Award at the SFS Cavalcade.
Upcoming Talks, Discussions:
April 15/16, 2021: I will discuss the paper ”Dynamic Inconsistent Risky Choice: Evidence from the Lab and the Field” at the CEPR European Workshop on Household Finance
May 7, 2021: I will present in the School of Business and Economics, Vrije Universiteit Amsterdam Finance seminar series, ”How Do Acquisitions Impact the Mental Health of Employees?”, Coauthors Laurent Bach, Ramin Baghai, and Rui Silva
May 18, 2021: I will present at the 2021 Boulder Summer Conference on Consumer Financial Decision Making, our paper: ”Are We Overdiagnosing Mental Illness? Evidence from Randomly Assigned Doctors” Coauthors Andrew Hertzberg and Andres Liberman
May 27, 2021: I will present in the Amsterdam Business School, UvA Finance Research seminar series, ”How Do Acquisitions Impact the Mental Health of Employees?”, Coauthors Laurent Bach, Ramin Baghai, and Rui Silva
Work in Progress:
”Dissemination of Research During COVID: Evidence from Quasi-Random Conference Slots”, Coauthors Renee Adams and Laurent Bach
”Intergenerational Transmission of Financial Distress: Evidence from Randomly Assigned Administrators”, Coauthors Emily Breza
”Expectations, Household Behavior, and Inequality: Evidence from Field Experiments”, Coauthors Arna Olafsson, Enrichetta Ravina, and Basit Zafar.
”The Price of Love” Coauthors: Jenny Säve-Söderbergh and Wenli Li
”Quantifying Positive and Negative Shocks to Mental Health over the Life-Cycle”, Coauthor Andrew Hertzberg