The Interest Rate Elasticity of Mortgage Demand: Evidence from Bunching at the Conforming Loan Limit

By Anthony A. DeFusco and Andrew Paciorek

American Economic Journal: Economic Policy, February 2017

This paper provides novel estimates of the interest rate elasticity of mortgage demand by measuring the degree of bunching in response to a discrete jump in interest rates at the conforming loan limit--the maximum loan size eligible for purchase by Fannie...

Are Information Disclosures Effective? Evidence from the Credit Card Market

By Enrique Seira, Alan Elizondo, and Eduardo Laguna-Müggenburg

American Economic Journal: Economic Policy, February 2017

Consumer protection in financial markets in the form of information disclosure is high on government agendas, even though there is little evidence of its effectiveness. We implement a randomized control trial in the credit card market for a large populati...

The Vulnerability of Minority Homeowners in the Housing Boom and Bust: Corrigendum

By Patrick Bayer, Fernando Ferreira, and Stephen L. Ross

American Economic Journal: Economic Policy, February 2017

Modeling the Revolving Revolution: The Debt Collection Channel

By Lukasz A. Drozd and Ricardo Serrano-Padial

American Economic Review, March 2017

We investigate the role of information technology (IT) in the collection of delinquent consumer debt. We argue that the widespread adoption of IT by the debt collection industry in the 1990s contributed to the observed expansion of unsecured risky lending...

The Social Cost of Near-Rational Investment

By Tarek A. Hassan and Thomas M. Mertens

American Economic Review, April 2017

We show that the stock market may fail to aggregate information even if it appears to be efficient, and that the resulting decrease in the information content of prices may drastically reduce welfare. We solve a macroeconomic model in which information ab...

Borrowing on the Wrong Credit Card? Evidence from Mexico

By Alejandro Ponce, Enrique Seira, and Guillermo Zamarripa

American Economic Review, April 2017

We establish new facts about the way consumers allocate debt among their credit cards using data for a representative sample of cardholders in Mexico. We find that relative prices are weak predictors of the allocation of debt, purchases, and payments. Con...

Moving to a Job: The Role of Home Equity, Debt, and Access to Credit

By Yuliya Demyanyk, Dmytro Hryshko, María Jose Luengo-Prado, and Bent E. Sørensen

American Economic Journal: Macroeconomics, April 2017

We use individual-level credit reports merged with loan-level mortgage data to estimate how home equity interacted with mobility in relatively weak and strong labor markets in the United States during the Great Recession. We construct a dynamic model of h...

Tying the Double-Knot: The Role of Assets in Marriage Commitment

By Jeanne Lafortune and Corinne Low

American Economic Review, May 2017

What explains the growing gap in marriage rates between socioeconomic groups? We present a robust stylized fact not previously documented: marriage rates are higher for individuals with more assets. We argue this may be driven by marriage and cohabitation...

Retirement Contribution Rate Nudges and Plan Participation: Evidence from a Field Experiment

By Jacob Goldin, Tatiana Homonoff, and Will Tucker-Ray

American Economic Review, May 2017

Simple interventions like changing the default or sending a short message can induce individuals to save more for retirement. However, messages that emphasize high savings rates may increase the amount that savings plan participants save while reducing th...

How Children with Mental Disabilities Affect Household Investment Decisions

By Vicki L. Bogan and Jose M. Fernandez

American Economic Review, May 2017

We analyze how children with mental disabilities influence parental portfolio allocation. We find that risky asset holding decreases among households with special needs children. However, conditional on participating in financial markets, households with ...

Some Lasting Effects of Undergraduate Economics on Retirement Planning

By William Bosshardt and William B. Walstad

American Economic Review, May 2017

This study investigated the likely effects of undergraduate economics on whether a college graduate has opened a retirement account four years after graduation. Economic education is measured by the number of economics credit hours or whether a college gr...

Household Finance after a Natural Disaster: The Case of Hurricane Katrina

By Justin Gallagher and Daniel Hartley

American Economic Journal: Economic Policy, August 2017

Little is known about how affected residents are able to cope with the financial shock of a natural disaster. This paper investigates the impact of flooding on household finance. Spikes in credit card borrowing and overall delinquency rates for the most f...

Why Don't Households Smooth Consumption? Evidence from a $25 Million Experiment

By Jonathan A. Parker

American Economic Journal: Macroeconomics, October 2017

This paper evaluates theoretical explanations for the propensity of households to increase spending in response to the arrival of predictable, lump-sum payments, using households in the Nielsen Consumer Panel who received $25 million in randomly distribut...

Payment Size, Negative Equity, and Mortgage Default

By Andreas Fuster and Paul S. Willen

American Economic Journal: Economic Policy, November 2017

This paper studies the treatment effect of monthly payment size on mortgage default, using a sample of adjustable-rate loans that experienced large payment reductions thanks to the recent low interest rate environment. Payment size has an economically lar...

The Consumption Effects of the 2007–2008 Financial Crisis: Evidence from Households in Denmark

By Thais Lærkholm Jensen and Niels Johannesen

American Economic Review, November 2017

Did the financial crisis in 2007–2008 spread from distressed banks to households through a contraction of the credit supply? We study this question with a dataset that contains observations on all accounts in Danish banks as well as comprehensive ...

Housing Wealth and Consumption: Evidence from Geographically-Linked Microdata

By Aditya Aladangady

American Economic Review, November 2017

Rising home values also raise the cost of living, offsetting their impact on consumption. However, additional home equity collateral can loosen borrowing constraints, increasing spending for households that value their current endowment of housing highl...

Interest Rate Pass-Through: Mortgage Rates, Household Consumption, and Voluntary Deleveraging

By Marco Di Maggio, Amir Kermani, Benjamin J. Keys, Tomasz Piskorski, Rodney Ramcharan, Amit Seru, and Vincent Yao

American Economic Review, November 2017

Exploiting variation in the timing of resets of adjustable-rate mortgages (ARMs), we find that a sizable decline in mortgage payments (up to 50 percent) induces a significant increase in car purchases (up to 35 percent). This effect is attenuated by vol...

The Effect of Wealth on Individual and Household Labor Supply: Evidence from Swedish Lotteries

By David Cesarini, Erik Lindqvist, Matthew J. Notowidigdo, and Robert Östling

American Economic Review, December 2017

We study the effect of wealth on labor supply using the randomized assignment of monetary prizes in a large sample of Swedish lottery players. Winning a lottery prize modestly reduces earnings, with the reduction being immediate, persistent, and quite sim...

Unemployment Insurance as a Housing Market Stabilizer

By Joanne W. Hsu, David A. Matsa, and Brian T. Melzer

American Economic Review, January 2018

This paper studies the impact of unemployment insurance (UI) on the housing market. Exploiting heterogeneity in UI generosity across US states and over time, we find that UI helps the unemployed avoid mortgage default. We estimate that UI expansions durin...

The Impact of AIDS Treatment on Savings and Human Capital Investment in Malawi

By Victoria Baranov and Hans-Peter Kohler

American Economic Journal: Applied Economics, January 2018

Antiretroviral therapy (ART), a treatment for AIDS, is rapidly increasing life expectancy throughout sub-Saharan African countries affected by the AIDS epidemic. This change in life expectancy has potentially profound influences on life-cycle decisions. A...