"The Price of Leverage: Learning from the Effect of LTV Constraints on Job Search and Wages" , with Gazi Kabas, March 2023 [Link to SSRN]

Does household leverage matter for workers’ job search, matching in the labor market, and wages? Theoretically, household leverage has been shown to have opposing effects on the labor market through, among others, a debt-overhang and a liquidity constraint channel. To test which channels dominate empirically, we exploit the introduction of a macroprudential borrowing restriction that exogenously reduces household leverage in Norway. We study home-owners who lose their job and find that a reduction in leverage raises wages by 3.3 percentage points after unemployment. The mandated restriction of leverage enables workers to search longer for jobs, and thereby find positions in firms that pay higher wage premia and switch to new occupations and industries. We observe no evidence that a greater use of credit during unemployment drives the extended job search. The positive effect on wages is persistent and more pronounced for workers who are more likely to benefit from improved job search, such as young people. Our findings contribute to the debate on the costs and benefits of policies that constrain household leverage and show that such policies, while primarily aiming at enhancing financial stability, have other positive effects such as improved labor market outcomes.

An early version of this paper circulated as "Household Leverage and Labor Market Outcomes Evidence from a Macroprudential Mortgage Restriction".

Make it or Break it: Corporate Bankruptcy and Management Careers, with Morten Grindaker and Andreas Kostøl [paper at SSRN] [previously circulated as: Executive Labor Market Frictions, Corporate Bankruptcy and CEO Careers ]

Featured on Harvard Law School bankruptcy roundtable and Finansavisen 

The extent to which a corporate bankruptcy can shift the career trajectory of managers has important implications for high-skilled labor markets but has proven difficult to measure. By combining an instrumental variable approach with the random assignment of judges who differ in their propensity to liquidate firms, this paper offers novel evidence for small and medium-sized business CEOs’ careers. We show that these CEOs, when displaced in bankruptcy, are 30 pp less likely to remain in the executive labor market, experience a temporary fall in labor earnings, and a persistent, near elimination of capital income. However, displaced CEOs are quickly re-employed and move to better-paying firms, although often in lower-ranked positions. Taken together, our evidence shows that CEOs can make or break their executive careers due to bankruptcy events that are beyond their control. We explore heterogeneity in effects and find that bankruptcy is most detrimental for longer-tenured CEOs and when a case is petitioned during times at which bankruptcy rates are low. Our findings are consistent with models of firm-specific human capital and statistical discrimination, where the labor market uses bankruptcy as a (negative) signal of managerial ability. 

What Do12 Billion Card Transactions Say About House Prices and Consumption?, with Knut Are Aastveit,  Jesper Böjeryd, Magnus Gulbrandsen and Ragnar Juelsrud , draft coming soon 

Rising house prices can drive up consumption and investment while falling house prices can depress the labor market and the economy at large. Using close to the universe of debit card payment data linked with relevant administrative background data for the full Norwegian population, we investigate how changes in house prices affect household consumption. We exploit the oil price shock of 2014-2015 as an instrument and compare the impact of changing house prices between Norwegian government workers, who face essentially no change in unemployment or income risk, and private sector workers in the regions of Norway that are highly dependent on oil production. Durable goods such as cars and furnishing have the strongest negative response to falling house prices while semi-durables such as clothes are less affected. Essential goods such as food and beverages have an opposite response, suggesting a substitution away from luxury consumption. The effects we find are highly concentrated among wealthier households. Older, retired, households do not respond to the house price shock.  

Credit Information, Discipline and Strategic Behavior by Firms, with Marieke Bos and Paola Morales, 2018 

Credit bureaus in many countries restrict the length of time that negative credit information of firms can be retained. The large variance in retention times across countries illustrates the lack of consensus on the optimal memory of negative information. By exploiting a variation in retention time of negative information for firms, provided by the introduction of the Habeas Data law in Colombia, we are able to analyze the causal link between the length of credit bureaus’ retention time and the subsequent behavior of lenders and borrowers. The law was ratified in 2009 and prohibited institutions in Colombia from accessing the entire credit history of borrowers. Since then, negative credit information is observably only for periods determined by the length of the delinquency period. Our results suggest that after the introduction of the Habeas Data law: i) the duration of loan delinquency periods is longer, ii) firms seem to strategically wait until their negative records disappear from the credit bureaus, before switching banks, iii) banks grant loans with higher interest rate spreads, lower collateral requirements, larger loan amounts and longer maturities. In addition, we find empirical evidence of both ex ante and ex post theories of collateral.

An earlier version of this paper circulated as "The Impact of Sharing Credit Information, Evidence from a Quasi-Experimental Variation"

Cross-Border Bank Flows, Regional Household Credit Booms and Bank Risk-Taking, with Dominik Boddin and Daniel te Kaat 

In this paper, we study the consequences of the increase in bank inflows after the ECB's implementation of non-conventional monetary policy in 2014/15 on household lending. For this purpose, we employ granular household survey data matched with supervisory bank data from Germany and estimate difference-in-differences regressions around this increase in bank inflows. We show that the inflow of liquidity from abroad induced more exposed banks, i.e., those with greater initial non-core funding ratios, to increase their consumer loan supply to low-income households. Mortgage lending is largely unaffected by bank flows. We also document that consumer expenditures by more exposed households rise simultaneously. our findings  speak to the capital flow-bank risk-taking nexus by providing new evidence at the household level. [SSRN link]

Buy Now, Pay Less (Later), with Christine Laudenbach, Elin Molin and Talina Sondershaus 

Using  data from a large Nordic provider of BNPL and banking services, we show that users of BNPL when doing online shopping increase their access to credit and obtain credit at rates below the equivalent based on their observable risk profile. Lower rates and better credit access reflect better repayment behavior by households who have experience with BNPL financing. Financial institutions that offer BNPL services learn about borrower quality beyond what is known in shared credit registers.  At the same, such financial institutions can earn a rent on the private information they collect.

(Draft coming soon)