Working paper

Household debt repayment behavior has been understudied, especially empirically, despite the heightened debate on rising household debt, personal bankruptcy filings, and arrears. In this paper, we use data from the European Community Household Panel to analyze the determinants of household debt arrears. The paper's primary aim is to understand the role of institutions in household arrears by exploiting cross-country differences and the panel nature of the data set.

Abstract: I identify and quantify the mortgage supply effect of the Community Reinvestment Act (CRA), a law mandating that banks help provide credit in lower-income neighborhoods, by exploiting a discontinuity in the selection rule determining which census tracts CRA targets. Using a comprehensive source of micro data on MSA mortgage applications, I find that CRA affects bank lending primarily in large MSA's, where banks are most scrutinized.

One contributor to the twentieth century rise in married women's labor force participation was declining responsiveness to husbands’ wages and other family income. Now that the rapid rise in married women’s participation has slowed and even begun to reverse, this paper asks whether married women’s cross-wage elasticities have continued to fall.

Using a large sample of individual credit information provided by a US credit bureau, this paper investigates the empirical relevance of stigma and information sharing on household bankruptcy and its trend. Many observers of bankruptcy patterns have conjectured that there exists an increased willingness to default that reflects a diminution of social stigma. In this paper, we use a new methodology to disentangle stigma and social learning—two acknowledgedly important social factors affecting default.

Abstract: We examine 401(k) borrowing since 1992 and identify a puzzle: despite potential gains from borrowing against 401(k) assets instead of from other sources, most eligible households eschew 401(k) loans, including many who carry relatively expensive balances on credit cards and auto loans. We estimate that households with access to 401(k) loans could have saved about $3.3 billion in 2004--about $200 per household--by shifting debt to 401(k) loans.

The Social Security trust fund is predicted to be depleted by 2041. While there are several viable reform proposals to restore long-term solvency of the Social Security system, one important element that is critical to the success of any reform remains unknown: how will individuals respond to, for example, a cut of their Social Security benefits. Will they work longer or save more or both, and to what extent will their response make up for the cut in benefits?

Abstract: We explore the types of data used to characterize risky subprime lending and consider the geographic dispersion of subprime lending. First, we describe the strengths and weaknesses of three different datasets on subprime mortgages using information from LoanPerformance, HUD, and HMDA. These datasets embody different definitions of subprime mortgages. We show that estimates of the number of subprime originations are somewhat sensitive to which types of mortgages are categorized as subprime.

Abstract: We construct two measures of the current wealth adequacy of older U.S. households using the 1998--2006 waves of the Health and Retirement Study (HRS). The first is the ratio of "comprehensive wealth"--defined as net worth plus the expected value of future income streams--to the wealth that would be needed to generate expected poverty-line income in future years. By this measure, we find that the median older U.S. household is reasonably well situated, with a "poverty ratio" of about 3.9 in 2006.

Millions of Americans have negative housing equity, meaning that the outstanding balance on their mortgage exceeds their home’s current market value. Our data show that the overwhelming majority of these households will not lose their homes. Our finding is consistent with historical evidence: we examine more than 100,000 homeowners in Massachusetts who had negative equity during the early 1990s and find that fewer than 10 percent of these owners eventually lost their home to foreclosure.

Increasingly, individuals are in charge of their own financial security and are confronted with ever more complex financial instruments. However, there is evidence that many individuals are not well-equipped to make sound saving decisions. This paper demonstrates widespread financial illiteracy among the U.S. population, particularly among specific demographic groups. Those with low education, women, African-Americans, and Hispanics display particularly low levels of literacy. Financial literacy impacts financial decision-making.