The Impact of Consumer Credit Access on Employment, Earnings and Entrepreneurship

Kyle Herkenhoff, Gordon Phillips and Ethan Cohen-Cole ()

No 22846, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: How does consumer credit access impact job flows, earnings, and entrepreneurship? To answer this question, we build a new administrative dataset which links individual employment and entrepreneur tax records to TransUnion credit reports, and we exploit the discrete increase in consumer credit access following bankruptcy flag removal. After flag removal, individuals flow into self-employment. New entrants earn more, borrow significantly using unsecured and secured consumer credit, and are more likely to become an employer business. In addition, after flag removal, non-employed and self-employed individuals are more likely to find unemployment-insured "formal" jobs at larger firms that pay greater wages. These estimates imply that firms believe previously bankrupt workers are 3.8% less productive than non-bankrupt workers, on average. These results suggest that consumer credit access matters for each stage of entrepreneurship and that credit-checks may be limiting formal sector employment opportunities.

JEL-codes: D04 D1 D12 D14 D22 D31 D83 E2 E21 G23 G3 G33 K35 K36 L22 M5 M52 O16 (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-ent, nep-mac and nep-sbm
Note: CF LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

Published as Journal of Financial Economics, Volume 141, Issue 1, July 2021, Pages 345-371

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Related works:
Working Paper: The Impact of Consumer Credit Access on Employment, Earnings, and Entrepreneurship (2017)
Working Paper: The Impact of Consumer Credit Access on Employment, Earnings and Entrepreneurship (2016)
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