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The Impact of Consumer Credit Access on Employment, Earnings, and Entrepreneurship

Kyle Herkenhoff (), Gordon Phillips () and Ethan Cohen-Cole ()
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Kyle Herkenhoff: University of Minnesota
Ethan Cohen-Cole: Econ One Research

No 2017-011, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: How does consumer credit access impact job flows, earnings, and entrepreneurship? To answer this question, we build a new administrative dataset which links individual employment and entrepreneur tax records to TransUnion credit reports, and we exploit the discrete increase in consumer credit access following bankruptcy flag removal. After flag removal, individuals flow into self-employment. New entrants earn more, borrow significantly using unsecured and secured consumer credit, and are more likely to become an employer business. In addition, after flag removal, non-employed and self-employed individuals are more likely to find unemployment-insured ``formal'' jobs at larger firms that pay greater wages. These estimates imply that firms believe previously bankrupt workers are 3.8% less productive than non-bankrupt workers, on average. These results suggest that consumer credit access matters for each stage of entrepreneurship and that credit-checks may be limiting formal sector employment opportunities.

Keywords: credit access; entrepreneurship; bankruptcy (search for similar items in EconPapers)
JEL-codes: K35 E50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ent, nep-mac and nep-sbm
Date: 2017-02
Note: M
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http://humcap.uchicago.edu/RePEc/hka/wpaper/Herken ... entrepreneurship.pdf First version, February 6, 2017 (application/pdf)

Related works:
Working Paper: The Impact of Consumer Credit Access on Employment, Earnings and Entrepreneurship (2016) Downloads
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