Credit Access and Household Well-being: Evidence from Payday Lending

Abstract

How does gaining access to expensive credit affect the well-being of credit-constrained households? I use plausibly exogenous zip code level variation in the temporal accessibility of payday loans to examine the causal effects of access to payday loans on household well-being. Using suicide risks as a long-term measure for household distress, I find detrimental effects from payday loans; that is, there is a sharp increase in attempted suicides after gaining access to payday loans only for people effectively eligible for payday loans. The increased suicide risks appear to be related to mental health deterioration from financial distress.

Keywords: Credit Access, Payday Loans, Household Finance, Subjective Well-being, Suicide Risks, Mental Health

JEL Classification: D14, D18, G23, G28, I31