Abstract: Marital property rights strengthen secondary earners’ economic power by giving them access to credit markets. I study how this crucial yet understudied feature of property laws influences household decision-making. The 2013 reversal of the Truth-in-Lending Act increased the borrowing capacity of secondary earners in equitable-distribution states but not in community-property states, where division-of-property laws superseded the policy change. Using a matched difference-in-differences design and administrative financial transaction records measuring the credit and consumption of each spouse, I show that this reversal increased secondary earners’ credit card limits by $1,506 or 60 percent of their monthly pre-reversal consumption mean. In turn, spouses shared consumption more equally, closing their pre-reversal consumption gap by half. Household spending shifted toward goods that could benefit both spouses. Delinquency rates were not measurably impacted, suggesting that household financial standing did not worsen. These results are consistent with credit causing a shift in marital bargaining power.
Abstract: Using bankruptcy filing information on parents matched with administrative data on their children, along with judicial leniency as an instrumental variable, we examine the effect of parental bankruptcy protection on children’s income, intergenerational mobility, and homeownership. We find that children whose parents receive Chapter 13 bankruptcy protection experience a significant increase in lifetime income. For every dollar of debt relief granted, these children gain two dollars in adjusted present value of lifetime earnings. Furthermore, they are more likely to rank in the top tercile of the income distribution, driven by increased intergenerational upward mobility, and are over five percentage points more likely to own a home by age thirty. Our findings suggest that bankruptcy protection and debt relief play an important role in fostering intergenerational mobility for low-income distressed households. Our results are most consistent with three mechanisms: protection of assets (e.g., house), higher investment in children's education and skill-development, and avoiding forced geographic mobility. We do not find support for neighborhood effects driving our estimates.
Abstract: I show that price regulation and increased oversight can unintentionally reduce credit access in the consumer credit market by driving out lenders with advanced screening technologies, disproportion- ately affecting borrowers with lower credit scores and limited credit histories. I focus on the sudden enforcement of state-level interest rate limits and oversight measures in the U.S. nonbank personal loan market. While prior research often assumes a fixed market structure, I find that these regulations lead to the exit of lenders with advanced screening abilities. Remaining lenders rely on traditional credit scores and possess less information about borrower default risk, raising prices and reducing credit avail- ability for subprime borrowers and those without credit scores. These changes negatively affect loan performance, borrower outcomes, and financial inclusion. I develop a structural lending model to iso- late the effects of shifting lender composition and changes in market power from interest rate caps, ex- amining their impact on prices, loan quantities, and profits. The model, which incorporates borrower heterogeneity, lender screening technologies, and adverse selection, shows that interest rate caps and in- creased oversight disproportionately harm low-default-risk borrowers who appear risky based on tradi- tional scoring. Counterfactual simulations suggest that raising the rate cap from 21% to 28% and cutting fixed regulatory costs by 45% could improve credit access for subprime borrowers.
Discussant: Matteo Benetton, University of California-Berkeley
