Credit and the Family: The Economic Consequences of Closing the Credit Gap of US Couples

Abstract

Closing disparities in credit access between spouses can help reduce consumption inequality
in the household. The 2013 reversal of the Truth-in-Lending Act increased the borrowing
capacity of secondary earners in equitable-distribution states but not in community property
states, where division-of-property laws superseded the policy change. Using a
matched difference-in-differences design and administrative financial transaction records
measuring the credit and consumption of each spouse, I show that this reversal increased
secondary earners’ credit card limits by $1,506. In turn, spouses shared consumption more
equally, closing their pre-reversal consumption gap by half. Household spending shifted
toward goods that benefit both spouses. Delinquency rates were not measurably impacted,
suggesting that household financial standing did not worsen. These results are consistent
with a model of joint decision-making under limited commitment, in which credit causes
a shift in marital bargaining power.

JEL Classification: D13, D14, G28, J12, J16