IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v34y2021i5p2549-2579..html
   My bibliography  Save this article

Minimum Wages and Consumer Credit: Effects on Access and Borrowing
[Price pass-through and the minimum wage]

Author

Listed:
  • Lisa J Dettling
  • Joanne W Hsu

Abstract

This paper examines how minimum wages affect lender and borrower interactions with consumer credit markets. We find that higher state minimum wages increase the supply of unsecured credit, reduce payday loan usage, decrease delinquency, and increase credit scores. Overall, minimum wages reduce borrowing costs and have positive spillover effects on disposable income and liquidity. A back-of-the-envelope of the cost savings indicates that higher minimum wages increase disposable income by 1.3% more than implied by estimates of the direct effect on earnings.

Suggested Citation

  • Lisa J Dettling & Joanne W Hsu, 2021. "Minimum Wages and Consumer Credit: Effects on Access and Borrowing [Price pass-through and the minimum wage]," The Review of Financial Studies, Society for Financial Studies, vol. 34(5), pages 2549-2579.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:5:p:2549-2579.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhaa091
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aleksandra Majchrowska, 2022. "Does minimum wage affect inflation?," Ekonomista, Polskie Towarzystwo Ekonomiczne, issue 4, pages 417-436.
    2. Hannon, Simona, 2024. "Essays on consumer finance," Other publications TiSEM 4958b451-b30a-4957-9763-1, Tilburg University, School of Economics and Management.
    3. Sandra E. Black & Jeffrey T. Denning & Lisa J. Dettling & Sarena Goodman & Lesley J. Turner, 2023. "Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being," American Economic Review, American Economic Association, vol. 113(12), pages 3357-3400, December.
    4. Jessica N. Flagg & Simona Hannon, 2023. "An Overview of Personal Loans in the U.S," Finance and Economics Discussion Series 2023-057, Board of Governors of the Federal Reserve System (U.S.).
    5. Agarwal, Sumit & Ambrose, Brent W. & Diop, Moussa, 2022. "Minimum wage increases and eviction risk," Journal of Urban Economics, Elsevier, vol. 129(C).
    6. David Neumark, 2023. "The Effects of Minimum Wages on (Almost) Everything? A Review of Recent Evidence on Health and Related Behaviors," NBER Working Papers 31191, National Bureau of Economic Research, Inc.
    7. Gregory E. Elliehausen & Simona Hannon, 2023. "FinTech and Banks: Strategic Partnerships That Circumvent State Usury Laws," Finance and Economics Discussion Series 2023-056, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:34:y:2021:i:5:p:2549-2579.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.