Charting the significance of credit and debt throughout society
Household debt has proliferated in the past decade. In the final quarter of 2018, it reached $13.54 trillion—an $869 billion increase since the previous peak in 2008 and a 21.4% increase since the post-crisis trough. While it is now widely recognized that the financialization of household consumption set the groundwork for the Recession (see for example this chapter by Manuel Aalbers), credit markets seem immune to structural reform.
On the one hand, access to credit enables purchases and investments crucial to long term financial mobility; on the other, it incorporates those who lack resources into a cycle of obligations to lenders. In her most recent publication in the Annual Review of Sociology, RACHEL E. DWYER questions how debt has shaped the American social landscape. She develops a two dimensional model of formal debt relationships which categorizes contracts according to the source of credit (state vs. market) and the nature of the obligation (prospective vs. retrospective). The model integrates the logic of debt and credit relationships with an analysis of distributional politics:
"The top row of prospective credit offers are more likely made to affluent or middle-class and disproportionately white populations, and the bottom row of retrospective financial obligations are more likely to fall on lower-income or poor and disproportionately racial/ethnic minority populations. The experience of debt and financial fragility is thus different across these social groups defined by class, race/ethnicity, and other social status, though also tied together by similar logics of financialization and individualized accountability for life conditions."
Dwyer's research shows how credit and debt relations vary geographically and temporally, encouraging a comparative analysis of debt relationships in countries with different political economies. Link to the article.
- On the unique role that credit markets play in the American economy, see Monica Prasad on the credit-welfare state tradeoff, and Colin Crouch on privatized-mortgage Keynesianism. Link to the first; link to the second.
- For a pre-crisis examination of credit and inequality, see Patrick Bolton and Howard Rosenthal's Credit Markets for the Poor. Link.
- Vicki Been, Ingrid Ellen, and Josiah Madar explore the relationship between urban segregation and subprime mortgage lending. Link.
New Researchers: VISIBILITY PREMIUM
Political effects of celebrity exposure
In a novel paper, HEYU XIONG—a Phd candidate at NORTHWESTERN and newly appointed professor at CASE WESTERN RESERVE UNIVERSITY—studied the political consequences of television celebrity. He used the career of Ronald Reagan as a case study and exploited quasi-experimental variation in television reception to estimate the effects of celebrity media exposure on political outcomes, finding that
support for Reagan based on non-political factors extended nearly two decades after his television career—an effect more pronounced in areas in which Reagan was not a known political entity. The findings suggest that elections hinge considerably more on non-political media exposure and personal characteristics than previously assumed.
From the abstract:
"My results contribute to our knowledge of the vote decision process. Understanding what candidate information is pertinent and how that information is processed is key to understanding the selection of elected officials and, subsequently, the policies those elected officials enact. The economic theory of electoral competition is traditionally situated in the framework of the policy oriented voter. Even without the assertion of rationality, voters are, at the very least, presumed to be voting in order to advance a policy position or to express a political preference. While this preoccupation is not misplaced, the results suggest that candidates' personal characteristics constitute a significant, if substandard, criterion for vote choice."
Link to the paper.
Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you'd like to see shared here? Send it our way: email@example.com.
- A new post on our blog Phenomenal World: economist Max Kasy provides a high-level overview of his paper exploring guaranteed income and the limitations of the Earned Income Tax Credit. Link.
- From California: In a push for open access to publicly funded research, the University of California—the largest public university system in America—terminated its subscription with the scientific publisher Elsevier over high costs. Link to coverage in Science Magazine, and link to the UC press release.
- NYU's Jacob Faber studies the connection between foreclosure and homelessness and finds that foreclosures within a given year correlate with homelessness in the following year. This paper carries "important implications for our understanding of the Great Recessions's consequences and demonstrates the need for expanded data collection on homeless populations." Link.
- Michael Rosenbaum, in a post for Innovation for Poverty Action, discusses the behavioral improvements necessary for more effective student loan repayment. "The behavioral problems are ones that may be simple and cost-effective to address: a personalized letter costs 80 cents by my estimate. That letter won't get rid of $1.4 trillion dollars of student loan debt, but it can improve stressed borrowers' lives in a meaningful way." Link. ht Sidhya
- At Vox, Dylan Matthews with a comprehensive review of the 600-page congressionally-ordered report on strategies for alleviating child poverty in the United States. Link. And link to the report, from the National Academy of Sciences.
- A new publication from the American Sociological Review provides evidence that growing precarity is impacting the health of workers: "These data reveal that exposure to routine instability in work schedules is associated with psychological distress, poor sleep quality, and unhappiness." Link.
- Alexandra Samuel on science fiction's predictive powers and the future of technology. Link.
- Earlier this month, a conference held at the Rhodes Center for Environment and Society discussed America's climate change future and explored its relationship to housing markets, stranded assets, and entrenched interests. Link to a series of lecture videos from the conference.
- Deepmind uses machine learning to improve the efficiency of energy grids. Link.
- A paper by H. Luke Shaefer, Kathryn Edin, Vincent Fusaro, and Pinghui Wu "examines the relationship between the decline of traditional cash welfare during the 2001-2015 period and two direct measures of wellbeing among households with children: household food insecurity and public school child homelessness. Using models that control for state and year trends, along with other factors, we find that the decline of cash assistance is associated with increases in these two forms of hardship." Link.
- Margaret O'Mara writes a history of the "uses" of foreign students in the US. Link.
- "The government of a country with a good financial reputation could borrow from the international capital market and use the proceeds to endow a sovereign wealth fund that mainly invests in the world stock market." Giacomo Corneo with a paper for the social wealth fund files, covering "the conditions under which such a policy is welfare‐improving, discusses the optimal size of such a fund, and proposes an institutional framework for the management of public stock ownership." Link.
- "The analysis makes precise how path-specific effects contribute to net effects, and illustrates how structural equations enable one to address questions that eluded probabilistic accounts." Naftali Weinberger on path-specific effects and probabilistic causality. Link.
- When Kodak accidentally discovered the Manhattan Project: "The fogging of Kodak's film and the Trinity test in New Mexico were eerily connected, revealing some chilling secrets about the nuclear age." Link.