The Labor Market Effects of Credit Market Information

Marieke Bos, Emily Breza and Andres Liberman

The Review of Financial Studies, 2018, vol. 31, issue 6, 2005-2037

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. Received April 5, 2017; editorial decision September 2, 2017 by Editor Andrew Karolyi. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web Site next to the link to the final published paper online.

Date: 2018
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Working Paper: The Labor Market Effects of Credit Market Information (2016)
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