The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Bad Credit, No Problem? Credit and Labor Market Consequences of Bad Credit Reports
Published: 06/01/2020 | DOI: 10.1111/jofi.12954
WILL DOBBIE, PAUL GOLDSMITH‐PINKHAM, NEALE MAHONEY, JAE SONG
We study the financial and labor market impacts of bad credit reports. Using difference‐in‐differences variation from the staggered removal of bankruptcy flags, we show that bankruptcy flag removal leads to economically large increases in credit limits and borrowing. Using administrative tax records linked to personal bankruptcy records, we estimate economically small effects of flag removal on employment and earnings outcomes. We rationalize these contrasting results by showing that, conditional on basic observables, “hidden” bankruptcy flags are strongly correlated with adverse credit market outcomes but have no predictive power for measures of job performance.