52 Pages Posted: 3 Sep 2015 Last revised: 1 May 2017
Date Written: April 1, 2017
We exploit a natural experiment to measure the causal effect of negative credit information on the employment and earnings of Swedish individuals at the margins of formal credit and labor markets. We estimate that one additional year of negative credit information reduces employment by 3% and wage earnings by $1,000. In comparison, the decrease in credit is only one-fourth as large. Negative credit information also causes an increase in self-employment and a decrease in mobility. Further evidence suggests this cost of default is borne inefficiently by the relatively more creditworthy individuals among previous defaulters.
Suggested Citation: Suggested Citation
Bos, Marieke and Breza, Emily and Liberman, Andres, The Labor Market Effects of Credit Market Information: Evidence from the Margins of Formality (April 1, 2017). Swedish House of Finance Research Paper No. 15-13; Columbia Business School Research Paper No. 15-80. Available at SSRN: https://ssrn.com/abstract=2654489 or http://dx.doi.org/10.2139/ssrn.2654489