The labor market effects of credit market information

M. Bos; E. Breza; A. Liberman

doi:10.1093/rfs/hhy006

The labor market effects of credit market information

M. Bos, E. Breza, A. Liberman

Research output: Contribution to Journal › Article › Academic › peer-review

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.

Original language	English
Pages (from-to)	2005-2037
Number of pages	33
Journal	Review of Financial Studies
Volume	31
Issue number	6
Early online date	23 Jan 2018
DOIs	https://doi.org/10.1093/rfs/hhy006
Publication status	Published - Jun 2018
Externally published	Yes

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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.",

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AB - 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.

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