How Do Consumers Fare When Dealing with Debt Collectors? Evidence from Out-of-Court Settlements
Ing-Haw Cheng, Felipe Severino & Richard Townsend
Review of Financial Studies, forthcoming
Do deals with debt collectors alleviate consumer financial distress? Using new data linking court and credit registry records, we examine civil collection lawsuits where consumers can settle out of court. Random assignment of judges with different styles generates exogenous variation in the likelihood of settlement negotiations. We find that settlements increase financial distress relative to going to court, likely by draining consumers of liquidity. The effect is stronger among less financially literate consumers. Survey evidence suggests that consumers generally overestimate how much they would pay through the court system. Perceived nonpecuniary benefits also motivate some consumers to settle.
The Effect of Interest Rate Caps on Bankruptcy: Synthetic Control Evidence from Recent Payday Lending Bans
Kabir Dasgupta & Brenden Mason
Journal of Banking & Finance, forthcoming
Citing consumer protection concerns, several states have recently enacted interest rate caps on small loans. After cataloguing the history of such legislation, we test whether these laws caused a decrease in the number of payday-lending establishments and subsequently prompted variation on incidence of bankruptcy filings. To motivate a causal interpretation of our estimates, we create a synthetic control that serves as a counterfactual from which we estimate the aggregate treatment effect of these interest rate ceilings. Importantly, we estimate the treatment effect for each period after the imposition of the cap, yielding novel insights about the dynamic heterogeneity in the relationship between payday-loan access and bankruptcy. Our results show payday-lending establishments drop by approximately 100% – a banishment of the industry. We find no short-run or long-run effects of these bans on bankruptcy. The range of our estimates allows us to rule out magnitudes that were documented in several previous studies.
The EITC and Maternal Time Use: More Time Working and Less Time with Kids?
Jacob Bastian & Lance Lochner
NBER Working Paper, August 2020
Parents spend considerable sums investing in their children's development, with their own time among the most important forms of investment. Given well-documented effects of the Earned Income Tax Credit (EITC) on maternal labor supply, it is natural to ask how the EITC affects other time allocation decisions, especially time with children. We use the American Time Use Surveys to study the effects of EITC expansions since 2003 on time devoted to a broad array of activities, with considerable attention to the amount and nature of time spent with children. Our results confirm prior evidence that the EITC increases maternal work and reduces time devoted to home production and leisure. More novel, we show that the EITC also reduces time spent with children; however, almost none of the reduction comes from time devoted to ``investment'' activities. Effects are concentrated among socioeconomically disadvantaged mothers, especially those that are unmarried. Results are also most apparent for mothers of young children. Altogether, our results suggest that the increased work associated with EITC expansions over time has done little to reduce the time mothers devote to active learning and development activities with their children.
State earned income tax credits and general health indicators: A quasi‐experimental national study 1993‐2016
Erin Morgan et al.
Health Services Research, forthcoming
Data Sources: Data on state‐level tax credits and covariates were obtained from the National Bureau of Economic Research and University of Kentucky Center for Poverty Research, respectively. These data were merged with Behavioral Risk Factor Surveillance System survey records from 1993‐2016.
Study Design: Using difference‐in‐differences approaches and survey‐weighted Poisson regression that accounted for clustering of observations and included state and year fixed‐effects, we assessed relationships between EITC and self‐reported overall health, frequent mental distress, and frequent poor physical health in the prior 30 days. Covariates included state minimum wage, state GDP, and adoption of Medicaid expansion. Sensitivity analyses revealed that parallel trends were plausible; there were no significant lead and lag effects.
Principal Findings: Among adults with no education beyond high school (n = 2 884 790), each additional 10‐percentage‐point increase in the generosity of state EITC — relative to the federal credit — was associated with fewer reports of frequent mental distress (−97.3 per 100 000; 95% CI: −237.2, 42.6) and frequent poor physical health (−149.6 per 100 000; 95% CI: −284.4, −14.9). When restricted to individuals interviewed during the three months when tax rebates are commonly disbursed, the magnitude of the association between EITC and prevalence of reported frequent mental distress was greater (−329.7 per 100 000; 95% CI: −636.0, −23.5).
SNAP Participants Improved Food Security And Diet After A Full-Service Supermarket Opened In An Urban Food Desert
Jonathan Cantor et al.
Health Affairs, August 2020, Pages 1386-1394
The Supplemental Nutrition Assistance Program (SNAP) is the largest US food and nutrition assistance program, tasked with improving food security among low-income households. Another federal effort to improve food access is the Healthy Food Financing Initiative (HFFI), which invested tens of millions of dollars to incentivize healthy food retail outlets in areas lacking access to nutritious, fresh food. We explore the intersection of these programs, testing the impact of a new, HFFI-financed full-service supermarket on SNAP participants in an urban food desert. After the supermarket’s opening, SNAP participants’ food security improved and intake of added sugars declined in the intervention neighborhood, but both were unchanged in a comparison neighborhood without a new supermarket. Intervention neighborhood participants also experienced relative declines in the percentage of daily calories from solid fats, alcoholic beverages, and added sugars. Our findings suggest that HFFI amplifies the effects of SNAP participation on improving food security and dietary quality in food deserts.