Job Market Paper

When Loss Strikes Twice: Severe Health Shocks and Financial Well-Being
Revise and Resubmit at the Review of Finance
Joint with Kaveh Majlesi and Paula Roth
Winner of the 2nd best paper prize at the Essen Health Conference 2024.
CINCH Working Paper Series, no 2024-2

Abstract:
We examine the impact of fatal and nonfatal health shocks on household defaults on financial obligations. We show that fatal shocks significantly increase the likelihood of defaults and provide evidence that housing wealth serves as an important self-insurance mechanism. Surviving spouses experiencing the greatest income losses are more likely to liquidate their homes, and those lacking housing wealth face a heightened risk of debt collection. Notably, these shocks have intergenerational consequences. Nonfatal health shocks cause an immediate but temporary rise in default risk. These findings suggest that improving survivors' benefits for those who lack resources could enhance welfare across generations.

Working Papers

Long-Term Impacts of Achievement-Based School Assignment
Reject and Resubmit at the Economic Journal

Abstract:
I study the long-term impacts of a reform changing school admission criteria from proximity to grades in Swedish upper secondary education. Implemented in three municipalities covering 10% of the student population, the reform increases educational attainment and expected midlife earnings. These gains are concentrated among students in the top 25% of the grade distribution, who also experience labor income gains. These high-achieving students become more likely to attend schools effective at sending students to higher education and to have higher-performing peers. However, due to grade disparities, the reform decreased intergenerational mobility and widened the education gap between natives and immigrants.

Buy Now Pay (Less) Later: Leveraging Private BNPL data in Consumer Banking (with Christine Laudenbach, Kasper Roszbach and Talina Sondershaus).
Norges Bank’s Working Papers 2/2025

Coverage: VoxEU, SUERF Policy Brief

Abstract:
“Buy Now, Pay Later” (BNPL) loans are an increasingly popular means to finance small-ticket purchases without interest. We show that using BNPL payments services produces benefits to both lender and borrower through the accumulation of private information. Using data from a large BNPL provider with a banking license, we document that providing BNPL payment services enables the bank to learn about the creditworthiness of potential consumer loan customers beyond what is known from shared credit registers. The information extracted from large numbers of BNPL transactions benefits both the bank and bank credit applicants that have a clean BNPL history. These BNPL customers are more likely to be approved, are offered lower interest rates and exhibit better repayment behavior than applicants without a BNPL history. Our finding suggest that the better repayment is not due solely to better terms, but also to a learning effect from the BNPL experience. While the bank offers consumer credit that is competitively priced relative to what regular banks can offer, it earns a return on the privately collected BNPL transactions data.

Intergenerational Transmission of Financial Distress; The Role of Nature versus Nurture (with Marieke Bos, Erik Plug, Kasper Roszbach and Paula Roth).

Abstract:
Motivated by stagnating social mobility in Western countries we ask whether and why children with parents in financial distress are more likely to be worse off themselves. In particular, we explore selection and causation as the leading explanations for any intergenerational persistence of problematic debt. Employing a unique dataset on financial distress and adoption, we disentangle genetic predispositions from environmental influences by analyzing adopted children's outcomes relative to both their biological and adoptive parents. Our findings suggest that nurture—measured by the environment provided by adoptive parents—is 3-4 times more significant than nature in explaining the persistence of financial distress across generations. This research contributes to understanding the causal effects of parental financial hardship, highlighting the role of environmental factors in the transmission of financial challenges, and informs policies aimed at minimizing intergenerational debt transmission through, for example, targeted debt relief programs.