Marianna Kudlyak

Recourse and Residential Mortgage Default: Evidence from U.S. States

We quantify the effect of recourse on default. We find that recourse affects default through lowering the borrowers sensitivity to negative equity. At the mean value of the default option for defaulted loans, borrowers are 30% more likely to default in non-recourse states; for homes appraised at

Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data

500,000 to

The Intensity of Job Search and Search Duration

750,000, borrowers are twice as likely to default in non-recourse states. We also find that, in states that allow deficiency judgments, defaults are more likely to occur through a lender-friendly procedure, such as a deed in lieu. We find no evidence that mortgage interest rates are lower in recourse states.

Accounting for Unemployment in the Great Recession: Nonparticipation Matters

One suggested hypothesis for the dramatic rise in household borrowing that preceded the financial crisis is that low-income households increased their demand for credit to finance higher consumption expenditures in order to keep up with higherincome households. Using household level data on debt accumulation during 2001-2012, we show that low-income households in high-inequality regions accumulated less debt relative to income than their counterparts in lower-inequality regions, which negates the hypothesis. We argue instead that these patterns are consistent with supply-side interpretations of debt accumulation patterns during the 2000s. We present a model in which banks use applicants incomes, combined with local income inequality, to infer the underlying type of the applicant, so that banks ultimately channel more credit toward lower-income applicants in low-inequality regions than high-inequality regions. We confirm the predictions of the model using data on individual mortgage applications in high- and low-inequality regions over this time period.

Are Young Borrowers Bad Borrowers? Evidence from the Credit CARD Act of 2009

We use micro data on applications to job openings by individuals on a job search website to study the relationship between search intensity and search duration. Our data allow us to control for several factors that can affect the measured relationship between intensity and duration, including the composition of job seekers and changes in the number of available job openings over the duration of search. We find that a job seeker sends fewer applications per week as search continues. We also find that job seekers who search on the website longer tend to send more applications in every period. We attribute this finding to job seeker heterogeneity. Controlling for the local stock of vacancies does little to affect the result, mainly because job seekers continue to apply to older vacancies well into their search spell.

Systematic Job Search: New Evidence from Individual Job Application Data

We conduct an accounting exercise of the role of worker flows between unemployment, employment, and labor force nonparticipation in the dynamics of the aggregate unemployment rate across four recent recessions: 1982-1983, 1990-1991, 2001, and 2007-2009 (the Great Recession). We show that, whereas during earlier recessions it was sufficient to examine the flows between employment and unemployment to account for the dynamics of the unemployment rate, this was not true in the Great Recession. The increased importance of the flows between nonparticipation and unemployment is documented across all age and gender groups.

Measuring Heterogeneity in Job Finding Rates Among the Nonemployed Using Labor Force Status Histories

Young borrowers are the least experienced financially and, conventionally, thought to be most prone to financial mistakes. We study the relationship between age and financial problems related to credit cards. Our results challenge the notion that young borrowers are bad borrowers. We show that young borrowers are among the least likely to experience a serious credit card default. We then exploit the 2009 CARD Act to identify which individuals self-select into obtaining a credit card early in life. We find that individuals who choose early credit card use default less and are more likely to get a mortgage while young.

Revisiting Gertler-Gilchrist Evidence on the Behavior of Small and Large Firms

We use novel high-frequency panel data on individuals job applications from a job posting website to study how job seekers direct their applications over the course of job search. We find that at the beginning of search, applicants are sorted across vacancies by education. As search continues, education becomes a weaker predictor of which job a job seeker applies for, and an average job seeker applies for jobs that are a first-week choice of less educated job seekers. In particular, between week 2 and 26, the correlation between a job seekers education and our measure of the type of job he applies for drops by 33 percent, with half of the drop happening by week 5. We interpret these findings to suggest that search is systematic, whereby a job seeker samples high wage opportunities (conditional on his belief about the probability of meeting the job requirements) first and lower wage opportunities later. The findings are consistent with the literature that documents declining reservation or desired wages, and provide evidence in favor of theories of job seekers learning. This paper was originally circulated under the title Sorting by Skill Over the Course of Job Search.

Generalized Matching Functions and Resource Utilization Indices for the Labor Market

We use a novel approach to studying the heterogeneity in the job finding rates of the nonemployed by classifying the nonemployed by labor force status (LFS) histories, instead of using only one-month LFS. Job finding rates differ substantially across LFS histories: they are 25-30% among those currently out of the labor force (OLF) with recent employment, 10% among those currently OLF who have been unemployed but not employed in the previous two months, and 2% among those who have been OLF in all three previous months. This heterogeneity cannot be deduced from the one-month LFS or from one-month responses to the CPS survey questions about desire to work or recent search activity. We conclude that LFS histories is an important predictor of the nonemployeds job finding probability, particularly for those OLF.

What We Know About Wage Adjustment During the 2007-09 Recession and Its Aftermath

Gertler and Gilchrist (1994) provide evidence for the prevailing view that adverse shocks are propagated via credit constraints of small firms. We revisit the behavior of small versus large firms during the episodes of credit disruption andrecessions in the sample extended to cover the 2007-09 economic crisis. We find that large firms short-term debt and sales contracted relatively more than those of small firms during the 2007-09 episode. Furthermore, the short-term debt of large firms also contracted relatively more in the previous tight money episodes if one takes into account the longer period that it takes for large firms debt to reach its post-shock trough. Our findings challenge the view that propagation of shocks in the economy takes place via credit constraints of small firms.