The Labor Market Effects of Credit Market Information

Marieke Bos, Emily Breza and Andres Liberman

No 22436, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Credit information affects the allocation of consumer credit, but its effects on other markets that are relevant for academic and policy analysis are unknown. This paper measures the effect of negative credit information on the employment and earnings of Swedish individuals at the margins of the formal credit and labor markets. We exploit a policy change that generates quasi-exogenous variation in the retention time of past delinquencies on credit reports and estimate that one additional year of negative credit information causes a reduction in wage earnings of $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. We exploit differences in the information available to employers and banks to show suggestive evidence that this cost of default is borne inefficiently by the relatively more creditworthy individuals among previous defaulters.

JEL-codes: D12 D14 G21 G23 J20 (search for similar items in EconPapers)
Date: 2016-07
New Economics Papers: this item is included in nep-cfn and nep-lma
Note: CF LS
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Citations: View citations in EconPapers (9)

Published as Marieke Bos & Emily Breza & Andres Liberman, 2018. "The Labor Market Effects of Credit Market Information," The Review of Financial Studies, vol 31(6), pages 2005-2037.

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