Working Papers

When Loss Strikes Twice: Severe Health Shocks and Financial Well-Being (with Kaveh Majlesi and Paula Roth)
Revise and Resubmit at the Review of Finance 
CINCH Working Paper Series, no 2024-2
2nd Best Paper Prize, Essen Health Conference 2024

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.

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

Conferences: IWAEE International Workshop on Applied Economics of Education, Copenhagen Education Network Workshop, Workshop on Human Capital and Public Policy

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)

Conferences:  University of Delaware and Federal Reserve Bank of Philadelphia Fintech & Financial Institutions Conference, BIS-CEPR-Gerzensee-SFI Conference on Financial Intermediation, CEPR Endless Summer Conference of Financial Intermediation and Corporate Finance, SAFE Household Finance Workshop, NBER Summer Institute Household Finance

Coverage: VoxEU CEPR, SUERF Policy Brief, Norges Bank Working Paper, The Economist

Abstract: Buy Now, Pay Later loans (BNPL) are an increasingly popular way to finance smallticket purchases. We provide new evidence on how BNPL influences regular bank credit markets, benefiting both lenders and borrowers through information production and learning. Using data from over one million unsecured bank loan applications from a bank that also provides BNPL services, we exploit the fact that BNPL enhances the bank’s ability to assess creditworthiness by incorporating transaction data beyond shared credit registers. We establish four key findings. First, BNPL users are more likely to be approved for bank loans due to lower internally assessed credit risk, while those with late BNPL payments face lower approval rates. Second, BNPL customers benefit from discounted interest rates, while the bank earns a profit margin by price discriminating among customers with a good internal payment history but differing external credit scores. Third, customers with a BNPL history exhibit better repayment behavior and lower default rates, partly driven by improved loan terms. Fourth, learning effects from prior BNPL use likely reinforce this behavior. Our findings suggest that BNPL improves risk assessment and fosters learning, enhancing credit outcomes and access for higher-risk borrowers, thereby promoting financial inclusion.

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

Conferences: HOFIMAR workshop at BI Norwegian Business School

Abstract: Financial distress has severe negative consequences for individuals and families, yet its intergenerational persistence remains poorly understood. Using rich administrative data from Sweden, we examine whether children whose parents experience financial distress are more likely to face similar challenges themselves. Leveraging an adoption design that separates genetic from environmental influences, we find that both nature and nurture matter, but the environment in which a child is raised is more than three times as important as inherited traits in explaining financial distress. Observable characteristics, particularly low liquid assets, account for around half of the observed transmission. Our findings underscore the causal impact of family environments on financial hardship and highlight the potential of targeted policies, such as debt relief and financial education, to break the cycle of intergenerational financial distress.