Targeted Debt Relief and the Origins of Financial Distress: Experimental Evidence from Distressed Credit Card Borrowers
Will Dobbie and
Jae Song ()
No 23545, NBER Working Papers from National Bureau of Economic Research, Inc
We study the drivers of financial distress using a large-scale field experiment that offered randomly selected borrowers a combination of (i) immediate payment reductions to target short-run liquidity constraints and (ii) delayed debt write-downs to target long-run debt constraints. We identify the separate effects of the payment reductions and debt write-downs using variation from both the experiment and cross-sectional differences in treatment intensity. We find that the debt write-downs significantly improved both financial and labor market outcomes despite not taking effect for three to five years. In sharp contrast, there were no positive effects of the more immediate payment reductions. These results run counter to the widespread view that financial distress is largely the result of short-run constraints.
JEL-codes: D14 J22 J31 K35 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp, nep-lma and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:23545
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().