Peer Reviewed Publications
- ”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”, Swedish House of Finance Research Paper No 15-05 Coauthors Bo Becker and Kasper Roszbach, Journal of Money Banking and Credit (2020), 52: 107-142 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 ratings 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 6, no. 40, 2020: eaba1551. AbstractAttention-deficit/hyperactivity disorder (ADHD) exerts lifelong functional impairment, including difficulty maintaining employment, poor credit, and suicide risk. To date, however, most studies have assessed highly-selected samples, often via self-reports. Using mental health data collected from the full Swedish population (N=11.44 million) between 2002-2015 and a random sample of credit bureau data (N=189,267), we provide the first study of financial and suicide outcomes among adults with ADHD. Adjusting for education and income, those with ADHD start adulthood with normal credit demand. However, their default rates grow exponentially into middle age, resulting in diminished access to credit despite high demand. Those with ADHD who suffer marked financial distress show a fourfold higher suicide rate than others with the disorder. Prescription medication use is unassociated with improved financial behaviors.
- ”The Labor Market Effects of Credit Market Information”, Review of Financial Studies, June 2018, 31(6), 2005-2037, 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.
- Editor’s Choice, 2018
- Michael J. Brennan Best Paper Award 2019
- ”How Do Acquisitions Impact the Mental Health of Employees?”, Coauthors: Laurent Bach Ramin Baghai, and Rui Silva. Using employer-employee level data linked to individual health records, we document that the incidence of stress, anxiety, depression, psychiatric medication usage, and even suicide increase following acquisitions. 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 cognitive and non-cognitive skills are most affected. A variety of tests address endogeneity concerns, including an analysis exploiting failed mergers. Our findings point to mental illness as a significant non-pecuniary cost of acquisitions.
- “Are We Overdiagnosing Mental Illness? Evidence from Randomly Assigned Doctors”, Coauthors: Andrew Hertzberg and Andres Liberman (Working Paper coming out soon), NBER Slides AbstractAlmost two in 10 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 market, wealth and family outcomes 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. Using a separate identification strategy, we measure the effect of military service on the same set of outcomes to rule out that the effect of diagnosis in our setting is primarily mediated by altering the probability of serving. Our findings are consistent with the potential over-diagnosis of mental illness.
- “Should Defaults Be Forgotten? Evidence from Variation in Removal of Negative Consumer Credit Information”, FRB of Philadelphia Working Paper No. 14-21, Coauthor Leonard Nakamura. AbstractThe practice of penalizing consumers long after they have paid off their debts continues to spark a debate on the length of time that defaults are retained in individuals’ credit records. By exploiting a natural experiment that generated exogenous variation in retention times, we analyze what happens when retention times are reduced. We find that the loss of information led banks to tighten their lending standards significantly. However as the number of individuals in the economy with clean records increased due to the reduction in retention time, net access to credit in the economy improved. Furthermore, as a borrower’s incentive to exert more effort increases, the overall default risk in the economy decreased. We cannot rule out that this reduction in retention time is optimal.
- ”Impact of a Decrease on Credit Bureaus’ Memory on the Borrowing Behavior of Firms and Lenders”, Coauthors: Paola Morales and Kasper Roszbach.
- Relative Income, Indebtedness and Defaults: An Empirical Characterization, Coauthors: Mats Levander, and Erik von Schedvin. AbstractUsing panel data on individual borrowing characteristics and neighborhood income, we assess the impact of relative income on indebtedness and payment delinquencies. We find that a worsening in relative income vis-à-vis similarly aged neighbors leads to higher indebtedness, primarily due to shifts in consumer debt. This relationship is not accompanied by a rise in loan delinquencies. However, we document over-indebtedness and financial distress for certain demographic subgroups that are presumably more responsive to peer influences (e.g., younger individuals). Our analysis is carefully structured to account for selection effects and omitted variables.
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 The project aims to analyze the financial consequences of the interaction between labor market participation, family formation, income, and savings over the lifecycle, exploiting differences between cohorts and marital status in the possibility to share their pension savings with one’s spouse pre- and post-death.
- ”Quantifying Positive and Negative Shocks to Mental Health over the Life-Cycle”, Coauthor Andrew Hertzberg
- “Forgotten Markets: The Importance of Pawn Shops”, joined with: Susan P. Carter and Paige M. Skiba, Law, Economics, and Conflict. eds Basu and R.C. Hockett, Mario Einaudi Center for International Studies, Cornell University, 2021. ISBN 9781501754838.
- ”Rationality in the Consumer Credit Market: Choosing between Alternative and Mainstream Credit”, joined with Sumit Agarwal. Handbook of US Consumer Economics, eds. Andrew Haughwout and Benjamin Mandel, New York, USA, Academic Press, August 2019, ISBN 9780128135242
- “Balancing Act: New Evidence and a Discussion of the Theory on the Rationality and Behavioral Anomalies of Choice in Credit Markets,” joined with Susan Payne Carter and Paige Marta Skiba. Research Handbook in Behavioral Law and Economics, eds., Joshua C. Teitelbaum and Kathryn Zeiler. London, UK: Edward Elgar Publishing, 2018. ISBN: 9781849805674
- ”Do Households Need Protection? Insights from Behavioral Economics“, Den svenska skulden. Konjunkturrådets rapport 2015, Peter Englund, Bo Becker, Torbjörn Becker, Marieke Bos, Per Wissén ISBN 9789186949655
- ”Online Intermediation and the Terms of Consumer Credit”, Sveriges riksbank economic review 2014:1, joined with Gustav Alfelt and Kasper Roszbach
- ”Essays on Household Finance”, November 2010, Stockholm University, ISBN: 9789174471601. Opponent: Professor Luigi Guiso EIEF; examination committee Professor Paolo Sodini, Astrid Muren and Sten Åke Stenberg.