Meta Brown

Do Informal Referrals Lead to Better Matches? Evidence from a Firm's Employee Referral System

Using a new firm-level data set that includes explicit information on referrals by current employees, we investigate the hiring process and the relationships among referrals, match quality, wage trajectories, and turnover for a single US corporation and test various predictions of theoretical models of labor market referrals. We find that referred candidates are more likely to be hired; experience an initial wage advantage, which dissipates over time; and have longer tenure in the firm. Further, the variances of the referred and nonreferred wage distributions converge over time. The observed referral effects appear to be stronger at lower skill levels. The data also permit analysis of the role of referrer-referee pair characteristics.

The Financial Crisis at the Kitchen Table: Trends in Household Debt and Credit

The Federal Reserve Bank of New York (FRBNY) Consumer Credit Panel, created from a sample of U.S. consumer credit reports, is an ongoing panel of quarterly data on individual and household debt. The panel shows a substantial run-up in total consumer indebtedness between the first quarter of 1999 and the peak in the third quarter of 2008, followed by a steady decline through the third quarter of 2010. During the same period, delinquencies rose sharply: Delinquent balances peaked at the close of 2009 and then began to decline again. This paper documents these trends and discusses their sources. We focus particularly on the decline in debt outstanding since mid-2008, which has been the subject of considerable policy and media interest. While the magnitudes of balance declines and borrower defaults, represented as “charge-offs” on consumers’ credit reports, have been similar, we find that debt pay-down has been more pronounced than this simple comparison might indicate.

Financial Education and the Debt Behavior of the Young

More than three-quarters of U.S. households bear consumer debt, yet we have little understanding of the relationship between financial education and the debt behavior of U.S. consumers. In this paper, we study the effects of exposure to financial training on debt outcomes in early adulthood. Identification comes from variation in financial literacy, economics, and mathematics course offerings and graduation requirements mandated over the 1990s and 2000s by state-level high-school curricula. The FRBNY Consumer Credit Panel provides debt outcomes based on quarterly Equifax credit reports from 1999 to 2012. Our analysis, based on a flexible event-study approach, reveals significant effects of financial education on debt-related outcomes of youth. On the extensive margin, financial literacy education has a sizable impact on the propensity of youth having a credit report. Conditional on having a credit report, on the intensive margin, math and financial literacy education exposure reduces the incidence of adverse outcomes – such as accounts in collections and delinquent accounts – and reduces both the likelihood of youth carrying debt and their average debt balances. The net effect of both math and financial literacy education is an increase in youths’ average creditworthiness, as measured by the Equifax risk score. On the other hand, economic education increases the likelihood of individuals carrying balances, leads to significant increases in debt balances – in particular, debt used to support consumption – and, at the same time, increases the likelihood of adverse credit outcomes, leading to a decline in youths’ average risk scores. The effects of these financial education policies accumulate over the course of early adulthood. Our results suggest that financial education programs, increasingly promoted by policymakers, are likely to have significant impacts on the financial decision-making of youth, but the effects depend on the content of these programs.

Do We Know What We Owe? A Comparison of Borrower- and Lender-Reported Consumer Debt

Household surveys are the source of some of the most widely studied data on consumer balance sheets, with the Survey of Consumer Finances (SCF) generally cited as the leading source of wealth data for the United States. At the same time, recent research questions survey respondents? propensity and ability to report debt characteristics accurately. We compare household debt as reported by borrowers to the SCF with household debt as reported by lenders to Equifax using the new FRBNY Consumer Credit Panel (CCP). Moments of the borrower and lender debt distributions are compared by year, age of household head, household size, and region of the country, in total and across five standard debt categories. Our central finding is that the SCF and CCP debt patterns are strikingly similar. There are, however, two noteworthy exceptions: The aggregate credit card debt implied by SCF borrowers? reports is estimated to be between 60 and 63 percent of that implied by CCP lenders? reports, and the aggregate student debt implied by the SCF is roughly 75 percent of that implied by the CCP. Despite the credit card debt mismatch, bankruptcy history is reported comparably in the borrower and lender sources, indicating that not all stigmatized consumer behaviors are underreported.

The Impact of Housing Markets on Consumer Debt: Credit Report Evidence from 1999 to 2012

We investigate the impact of large swings in the housing market on nonmortgage borrowing, including student, credit card, auto, and home equity debts. For this purpose, we use CoreLogic geographic house price variation, matched with rich data on consumer liabilities from the Equifax-sourced FRBNY Consumer Credit Panel. The length and timing of our panel allow us to study the consumer debt portfolio response to house price changes during a boom-and-bust cycle of historic magnitude as well as during more ordinary times. In first-differenced instrumental variables estimation, we find that during 1999-2001, homeowners substituted out of nonhousing (largely credit card) debt and into home equity-based debt at a nearly dollar-for-dollar rate in response to house price increases. During the housing boom of 2002-06, however, homeowners abandoned the practice of substituting into less costly debt as equity grew, and instead increased obligations across the board. From 2007-12, sample homeowners experienced a 23 percent average house price decline, and withdrew from home equity debt without adding to non-housing debt. We observe substantial heterogeneity in this pattern: Substitution in both 1999-2001 and 2007-12 ranges from 50 cents to more than dollar-for-dollar for older and prime borrowers, while the decidedly nonprime borrow more modestly, show less evidence of substitution, and shed large amounts of all types of debt from 2007-12. Finally, difference-in-differences and FD-IV estimates are consistent with both 1) a 2012 relative debt overhang of at least

Debt, Jobs, or Housing: What's Keeping Millennials at Home?

1,800 on average, despite little remaining home equity advantage, for homeowners who experienced a more pronounced boom-and-bust cycle and 2) little substitution out of home equity debt into student loans in response to recent house price declines.

Informal Care and the Division of End-of-Life Transfers.

Young Americans’ residence choices have changed markedly over the past fifteen years, with recent cohorts entering the housing market at lower rates, and lingering much longer in parents’ households. This paper begins with descriptive evidence on the residence choices of 1 percent of young Americans with credit reports, observed quarterly for fifteen years in the Federal Reserve Bank of New York’s Equifax-sourced Consumer Credit Panel (CCP). Steep increases in the rate of living with parents or other substantially older household members have emerged as youth increasingly forsake living alone or with groups of roommates. Coupledom, however, appears stable. Homeownership at age thirty shows a precipitous drop following the recession, particularly for student borrowers. In an effort to decompose the contributions of housing market, labor market, and student debt changes to the observed changes in young Americans’ living arrangements, we model flows into and out of co-residence with parents. Estimates suggest countervailing influences of local economic growth on co-residence: strengthening youth labor markets support moves away from home, but rising local house prices send independent youth back to parents. Finally, we find that student loans deter independence: state-cohort groups who were more heavily reliant on student debt while in school are significantly and substantially more likely to move home to parents when living independently, and are significantly and substantially less likely to move away from parents when living at home.