Credit and the Family: The Economic Consequences of Closing the Credit Gap of U.S. Couples

Abstract

Marital property rights strengthen secondary earners' economic power by giving them access to credit markets. I study how this crucial yet understudied feature of property laws influences household decision-making. 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earners in equitable-distribution states but not in community-property states, where division-of-property laws superseded the policy change.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-indifferences design and administrative financialtransaction records measuring the credit and consumption of each spouse, I show that this reversal increased secondary earners' credit card limits by $1,506 or 60 percent of their monthly pre-reversal consumption mean. In turn, spouses shared consumption more equally, closing their pre-reversal consumption gap by half. Household spending shifted toward goods that could benefit both spouses. Delinquency rates were not measurably impacted, suggesting that household financial standing did not worsen. These results are consistent with credit causing a shift in marital bargaining power.

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