Shale Shocked: Cash Windfalls and Household Debt Repayment

J. Anthony Cookson, Erik P. Gilje and Rawley Heimer

No 27782, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How do persistent cash flow shocks affect debt repayment across the distribution of households? Using individual data on natural gas shale royalty payments matched with credit bureau data for 215,639 consumers, we estimate that individuals repay 33 cents of debt per dollar of windfall, and that initially-subprime individuals repay approximately 5 times more debt than initially-prime individuals do. This difference in debt repayment is driven by changes to revolving debt balances. Finally, we show that debt repayment precedes durable goods consumption, particularly for households who were initially financially constrained. These results shed new light on how deleveraging affects household consumption.

JEL-codes: G5 G50 G51 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-ene and nep-opm
Note: CF
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Citations: View citations in EconPapers (4)

Published as J. Anthony Cookson & Erik P. Gilje & Rawley Z. Heimer, 2022. "Shale shocked: Cash windfalls and household debt repayment," Journal of Financial Economics, vol 146(3), pages 905-931.

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