Research

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earners in equitable-distribution states but not in community-property states, where division-of-property laws superseded the policy change.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-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 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.

Abstract: Investing in children’s human capital reduces business investments for U.S. entrepreneurial households. Using financial account data of 90,000 small businesses linked to their owners and a regression discontinuity design that compares the business performance of households with college-aged dependents (18–23) to those with near-college-aged dependents (14–17), I show that business revenues and expenses decline sharply when owners’ children reach age 18. Despite the declines, profitability and productivity remain largely unaffected, suggesting a general downsizing rather than a loss in efficiency. Heterogeneity analysis shows that downsizing is concentrated among highly indebted owner households and businesses with volatile cash flows. For each dollar increase in household spending associated with a child turning 18, business expenses decline by $2.26. These findings are consistent with entrepreneurial parents reallocating capital from business investments toward their children’s human capital, as both compete for the same pool of internal family financial resources.

Abstract The efficiency of federal lending guarantees depends on whether guarantees increase lending supply or simply act as a subsidy to lenders. We use notches in the guarantee rate schedule for Small Business Administration (SBA) loans to estimate the elasticity of bank lending volume to loan guarantees. We show significant bunching in the loan distribution on the side of the size threshold that carries a more generous loan guarantee. The excess mass implies that increasing guarantee generosity by one percentage point of loan principal would increase per-loan lending volume by $19,000. Excess mass increases in periods with guarantee generosity, and placebo results indicate that the effect disappears when the guarantee notch is eliminated.

Abstract This article investigates the impact of political uncertainty on contractual lending terms using a large sample of syndicated loans and a within-firm estimation approach to achieve identification. Firms pay 7 basis points (bps) more on loans originated when their lenders are undergoing an election relative to when their lenders are not undergoing an election. Lenders from less financially developed countries are more likely to pass political uncertainty costs to borrowers. Consistent with electoral uncertainty driving this premium, the most contested elections have the largest impact (17 bps). Overall, political uncertainty leads to a tangible increase in firms’ financing costs.