What Determines Consumer Financial Distress? Place- and Person-Based Factors
Benjamin Keys, Neale Mahoney & Hanbin Yang
NBER Working Paper, February 2020
We use credit report data for a representative sample of 35 million individuals over 2000-2016 to examine consumer financial distress in the United States. We show there are large, persistent geographic disparities in consumer financial distress, with low levels in the Upper Midwest and high levels in the Deep South. To better understand these patterns, we conduct a "movers" analysis that examines how financial distress evolves when people move to places with different levels of financial distress. For collections and default, there is only weakly convergence following a move, suggesting these types of financial distress are not primarily caused by place-based factors (such as local economic conditions, loan supply, and state laws) but instead reflect person-based characteristics (such as financial literacy and risk preferences). In contrast, for personal bankruptcy, we find a sizable place-based effect, which is consistent with anecdotal evidence on how local legal factors influence the bankruptcy filing decision. Individual characteristics determine whether you get into financial distress, while place-based factors determine whether you use bankruptcy to get out.
Hand to Mouth: Financial Stress and Food Insecurity
Alexander Butler et al.
Rice University Working Paper, February 2020
We link consumer credit bureau data to data on household demographics and consumption choices. Using a rich set of fixed effects to remove confounding influences, we show that financial stress changes consumers’ consumption patterns. Not only does financial stress change how and where consumers shop, but it also affects the types and quality of food they buy. Consumers exhibit a dramatic shift toward purchasing cheap, high-calorie foods during times of high financial distress, which we interpret as a manifestation of food insecurity. Families with children are especially sensitive and respond more sharply to financial stress. Our results offer policy implications for targeted interventions.
Effects of the Minimum Wage on Child Health
George Wehby et al.
NBER Working Paper, January 2020
Effects of the minimum wage on labor market outcomes have been extensively debated and analyzed. Less studied, however, are other consequences of the minimum wage that stem from changes in a household’s income and labor supply. We examine the effects of the minimum wage on child health. We employ data from the National Survey of Children’s Health in conjunction with a difference-in-differences research design. We estimate effects of changes in minimum wage throughout childhood. We find evidence that an increase in the minimum wage throughout childhood is associated with a large improvement in child health. A particularly interesting finding is that much of the benefits of a higher minimum wage are associated with the period between birth and aged 5.
The Welfare State with Private Alternatives: The Transformation of Popular Support for Social Insurance
Marius Busemeyer & Torben Iversen
Journal of Politics, forthcoming
Private alternatives to the public provision of welfare state services and benefits have expanded in almost all OECD countries over the past decades. In this paper, we study how this change affects patterns of public support for the welfare state and, in the long term, the political sustainability of solidaristic social policies. Our core argument is that the availability of private alternatives undermines support for public provision of social insurance policies, in particular among the middle and upper-income classes, whose political support is crucial for the political viability of the universalist welfare state regime. We test our theoretical claim empirically with survey data from the ISSP Role of Government module for 20 OECD countries.
Renovating Subsidized Housing: The Impact On Tenants’ Health
Ingrid Gould Ellen, Kacie Dragan & Sherry Glied
Health Affairs, February 2020, Pages 224-232
Many public and subsidized housing developments in the US are aging and in need of significant repairs. Some observers worry that their poor condition threatens the health of residents. We evaluated a recent renovation of public housing that was undertaken through the transfer of six housing developments from the New York City Housing Authority to a public-private partnership. We studied whether the renovation and transfer to private managers led to improvements in tenants’ health over three years, as measured by Medicaid claims. While we did not find significant improvements in individual health outcomes, we found significant relative improvements in overall disease burden when measured using an index of housing-sensitive conditions. These findings are not surprising. Given that broad-based housing renovations address a diverse set of health conditions, we should not expect them to have a significant impact on any single condition in the short run. Yet they may significantly improve residents’ overall well-being over time.
Impact of gentrification on adult mental health
Linda Diem Tran et al.
Health Services Research, forthcoming
Data Sources: We pooled 5 years of secondary data from the California Health Interview Survey (2011‐2015) and focused on southern California residents.
Study Design: We compared adults (n = 43 815) living in low‐income and gentrified, low‐income and not gentrified, middle‐ to high‐income and upscaled, and middle‐ to high‐income and not upscaled neighborhoods. We performed a probit regression to test whether living in a gentrified neighborhood increased residents' probabilities of having serious psychological distress in the past year and stratified analyses by neighborhood tenure, homeownership status, and low‐income status. Instrumental variables estimation and propensity scores were applied to reduce bias arising from residential selection and simultaneity. An endogenous treatment effects model was also applied in sensitivity analyses.
Principal Findings: Living in a gentrified and upscaled neighborhood was associated with increased likelihood of serious psychological distress relative to living in a low‐income and not gentrified neighborhood. The average treatment effect was 0.0141 (standard error = 0.007), which indicates that the prevalence of serious psychological distress would have been 1.4 percentage points less if none of the respondents lived in gentrified neighborhoods. Gentrification appears to have a negative impact on the mental health of renters, low‐income residents, and long‐term residents. This effect was not observed among homeowners, higher‐income residents, and recent residents.
Housing Search Frictions: Evidence from Detailed Search Data and a Field Experiment
Peter Bergman, Eric Chan & Adam Kapor
Columbia University Working Paper, January 2020
This paper shows that imperfect information about school quality causes low-income families to live in neighborhoods with lower-performing, more segregated schools. We randomized the addition of school quality information onto a nationwide website of housing listings for families with housing vouchers. We find that this information causes families to choose neighborhoods with schools that have 1.5 percentage point higher proficiency rate on state exams. We use data from the experiment to estimate a dynamic model of families' search for housing on and off the website, as well as their location decisions. The model incorporates imperfect information about school quality and characterizes the bias that would arise from estimating neighborhood preferences ignoring this information problem. Having data from both the treatment and control groups allows us to estimate families' prior beliefs about school quality and each group's apparent valuation of school quality. Families tend to underestimate school quality conditional on neighborhood characteristics. If we had ignored imperfect information, we would have estimated that the control group valued school quality relative to their commute downtown by less than half that of the treatment group.
Efficiency Versus Equity in the Provision of In-Kind Benefits: Evidence from Cost Containment in the California WIC Program
Katherine Meckel, Maya Rossin-Slater & Lindsey Uniat
NBER Working Paper, January 2020
In many U.S. public programs, the government contracts with private firms to deliver in-kind benefits to recipients. These public-private partnerships generate agency problems that could drive up costs and lower program efficiency, but cost containment regulations may discourage firm participation and reduce access among eligible households. We examine these trade-offs in the context of California’s Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides vouchers to low-income pregnant women and children under five to obtain free food packages from private vendors, and has complex rules about eligible products. We use variation from a 2012 cost containment reform, which resulted in a 55 percent drop in the number of small vendors, and examine how local access to small vendors affects WIC take-up among pregnant women. We find that within-ZIP-code access to small vendors raises the likelihood of WIC take-up among first-time mothers, and that this effect is stronger for foreign-born than U.S.-born women and exists even for mothers who also have access to a larger WIC vendor. Our findings suggest that small vendors are uniquely effective at lowering barriers to take-up among subgroups of women with high program learning costs, and that cost containment reforms, which frequently target these vendors, may have unintended consequences of inequitably reducing program access.
Is the Cure Worse than the Disease? Unintended Effects of Payment Reform in a Quantity-based Transfer Program
NBER Working Paper, January 2020
Quantity vouchers are used in redistributive programs to shield participants from price variation and alter their consumption patterns. However, because participants are insensitive to prices, vendors of program goods are incentivized to price discriminate between program and non-program customers. I study these trade-offs in the context of a reform to reduce price discrimination in the Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides a quantity voucher for nutritious foods to low-income mothers and children. The reform caused vendors to drop out, reducing program take-up. In addition, smaller vendors increased prices charged to non-WIC shoppers by 6.4%.