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The Labor Market Effects of Credit Market Information

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  • Marieke Bos
  • Emily Breza
  • Andres Liberman

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.

Suggested Citation

  • Marieke Bos & Emily Breza & Andres Liberman, 2018. "The Labor Market Effects of Credit Market Information," The Review of Financial Studies, Society for Financial Studies, vol. 31(6), pages 2005-2037.
    • Handle: RePEc:oup:rfinst:v:31:y:2018:i:6:p:2005-2037.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhy006
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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