Papers Containing Keywords(s): 'lending'
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Authors
Nuri Ersahin - 4
Timothy Bates - 4
Viewing papers 11 through 20 of 28
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Working PaperTax Preparers, Refund Anticipation Products, and EITC Noncompliance
December 2017
Working Paper Number:
carra-2017-10
This work examines whether the availability of tax refund anticipation products (either in the form of a loan or a temporary bank account) is associated with higher non-compliance rates for the Earned Income Tax Credit (EITC). Refund anticipation products are offered by tax preparers as a way for taxpayers to receive a refund faster or to have the tax preparation fee paid from the refund (or both). These products are, on average, costly for taxpayers compared with the average value of a refund, and they are often marketed to low-income taxpayers who may be liquidity constrained or unbanked. Both tax preparers and taxpayers have perverse incentives to use these products, and the temptation of a large refund (for the taxpayer) and added fees and interest (for the tax preparer) may induce erroneous claiming of credits. The paper examines the association between refund anticipation product use and the overpayment of EITC using tax records and survey data linked at the individual level. For taxpayers in the Current Population Survey Annual and Social Economic Supplement, EITC eligibility is estimated based on household characteristics and combined survey and administrative income information; the data include EITC credit receipt, the use of paid tax preparation or online filing, and the receipt of a refund anticipation product. Both the incorrect payment of EITC and the value of EITC overpayment are associated with preparer use, and to a lesser extent with the use of online filing, when compared with paper filing. Incorrect payment is exacerbated for preparer and online filing when a refund anticipation product is purchased. Finally, an exogenous price shock to the tax preparation industry occurred in 2010. This allows for separately identifying a 'preparer effect' on EITC noncompliance. The rate of incorrect payment and the dollar value of overpayment increased in the tax year of the shock for those using a preparer and buying a product.View Full Paper PDF
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Working PaperCreditor Rights, Technology Adoption, and Productivity: Plant-Level Evidence
January 2017
Working Paper Number:
CES-17-36
I analyze the impact of strengthening of creditor rights on productivity using plant-level data from the U.S. Census Bureau. Following the adoption of anti-recharacterization laws that improve the ability of lenders to access the collateral of the firm, total factor productivity of treated plants increases by 2.6 percent. This effect is mainly observed among plants belonging to financially constrained firms. Furthermore, treated plants invest in capital of younger vintage and newer technology, and become more capital-intensive. My results suggest that strengthening of creditor rights leads to a relaxation in borrowing constraints, and helps firms adopt a more efficient production technology.View Full Paper PDF
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Working PaperFirm Leverage, Consumer Demand, and Employment Losses during the Great Recession
January 2017
Working Paper Number:
CES-17-01
We argue that firms' balance sheets were instrumental in the propagation of consumer demand shocks during the Great Recession. Using establishment-level data, we show that establishments of more highly levered firms exhibit a significantly larger decline in employment in response to a drop in consumer demand. These results are not driven by firms being less productive, having expanded too much prior to the Great Recession, or being generally more sensitive to fluctuations in either aggregate employment or house prices. At the county level, we find that counties with more highly levered firms experience significantly larger job losses in response to county-wide consumer demand shocks. Thus, firms' balance sheets also matter for aggregate employment. Our research suggests a possible role for employment policies that target firms directly besides conventional stimulus.View Full Paper PDF
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Working PaperA Loan by any Other Name: How State Policies Changed Advanced Tax Refund Payments
June 2016
Working Paper Number:
carra-2016-04
In this work, I examine the impact of state-level regulation of Refund Anticipation Loans (RALs) on the increase in the use of Refund Anticipation Checks (RACs) and on taxpayer outcomes. Both RALs and RACs are products offered by tax-preparers that provide taxpayers with an earlier refund (in the case of a RAL) or a temporary bank account from which tax preparation fees can be deducted (in the case of a RAC). Each product is costly compared with the value of the refund, and they are often marketed to low-income taxpayers who may be liquidity constrained or unbanked. States have responded to the potentially predatory nature of RALs through regulation, leading to a switch to RACs. Using zip-code-level tax data, I examine the effects of various state-level policies on RAL activity and the transition of tax-preparers to RACs. I then specifically analyze New Jersey's interest rate cap on RALs, a regulation that was accompanied by greater enforcement of existing tax-preparer regulations. Employing an empirical strategy that uses variation in taxpayer location, which should be uninfluenced by tax preparers' decisions to provide these products and a state's decision to regulate them, I find increases in RAL and RAC use for taxpayers living near New Jersey's border with another state. Furthermore, I find that these same border taxpayers reported more social program use and more persons per household - a finding that is in line with the results of similar research into the effects of short-term borrowing on family finances.View Full Paper PDF
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Working PaperAsset Allocation in Bankruptcy
February 2016
Working Paper Number:
CES-16-13
This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. We identify 129,000 bankrupt establishments and construct a novel dataset that tracks the occupancy, employment and wages paid at real estate assets over time. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that even after accounting for reallocation, the long-run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users, in areas with low access to finance, and in areas with low economic growth. The results highlight that different bankruptcy approaches affect asset allocation and utilization particularly when search frictions and financial frictions are present.View Full Paper PDF
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Working PaperCreditor Rights and Entrepreneurship: Evidence from Fraudulent Transfer Law*
January 2016
Working Paper Number:
CES-16-31
We examine entrepreneurial activity following the adoption of fraudulent transfer laws in the U.S. These laws strengthen creditor rights by removing the burden of proof from creditors attempting to claw back funds that were transferred out of failing businesses. These laws are particularly important for entrepreneurs whose personal assets are often commingled with those of the venture. Using establishment-level data from the U.S. Census Bureau, we find significant declines in start-up entry, churning among new entrants, and closures of existing ventures after the passage of these laws. Our findings suggest that strengthening creditor rights can, in some circumstances, impede entrepreneurial activity and slow down the process of creative destruction.View Full Paper PDF
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Working PaperHow Credit Constraints Impact Job Finding Rates, Sorting & Aggregate Output*
January 2016
Working Paper Number:
CES-16-25
We empirically and theoretically examine how consumer credit access affects dis- placed workers. Empirically, we link administrative employment histories to credit reports. We show that an increase in credit limits worth 10% of prior annual earnings allows individuals to take .15 to 3 weeks longer to find a job. Conditional on finding a job, they earn more and work at more productive firms. We develop a labor sorting model with credit to provide structural estimates of the impact of credit on employ- ment outcomes, which we find are similar to our empirical estimates. We use the model to understand the impact of consumer credit on the macroeconomy. We find that if credit limits tighten during a downturn, employment recovers quicker, but output and productivity remain depressed. This is because when limits tighten, low-asset, low- productivity job losers cannot self-insure. Therefore, they search less thoroughly and take more accessible jobs at less productive firms.View Full Paper PDF
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Working PaperCollateral Values and Corporate Employment
September 2015
Working Paper Number:
CES-15-30R
We examine the impact of real estate collateral values on corporate employment. Our empirical strategy exploits regional variation in local real estate price growth, firm-level data on real estate holdings, as well as establishment-level data on employment and the location of firms' operations from the U.S. Census Bureau. Over the period from 1993 until 2006, we show that a typical U.S. publicly-traded firm increases employment expenditures by $0.10 per $1 increase in collateral. We show this additional hiring is funded through debt issues and the effects are stronger for firms likely to be financially constrained. These firms increase employment at establishments outside of their core industry focus and away from the location of real estate holdings, leading to regional spillover effects. We document how shocks to collateral values influence labor allocation within firms and how these effects show up in the aggregate.View Full Paper PDF
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Working PaperOWNER CHARACTERISTICS AND FIRM PERFORMANCE DURING THE GREAT RECESSION
September 2014
Working Paper Number:
CES-14-36
Minority owned businesses are an increasing important component of the U.S. economy, growing at twice the rate of all U.S. businesses between 2002 and 2007. However, a growing literature indicates that minority-owned businesses may have been especially impacted by the Great Recession. As house prices declined, foreclosures fell disproportionately on urban minority neighborhoods and one of the sources of credit for business owners was severely constrained. Using 2002-2011 data from the Longitudinal Business Database linked to the 2002 Survey of Business Owners, this paper adds to the literature by examining the employment growth and survival of minority and women employer businesses during the last decade, including the Great Recession. At first glance, our preliminary findings suggest that black and women-owned businesses underperform white, male-owned businesses, that Asian-owned businesses outperform other groups, and that Hispanic-owned businesses outperform non-Hispanic ones in regards to employment growth. However, when we look only at continuing firms, black-owned businesses outperform white-owned businesses in terms of employment growth. At the same time, we also find that the recession appears to have impacted black-owned and Hispanic-owned businesses more severely than their counterparts, in terms of employment growth as well as survival. This is also the case for continuing black and Hispanic-owned firms.View Full Paper PDF
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Working PaperSpillovers From Costly Credit
March 2013
Working Paper Number:
CES-13-11
Recent research on the effects of credit access among low- and moderate-income households finds that high-cost payday loans exacerbate, rather than alleviate, financial distress for a subset of borrowers (Melzer 2011; Skiba and Tobacman 2011). In this study I find that others, outside the borrowing household, bear a portion of these costs too: households with payday loan access are 20% more likely to use food assistance benefits and 10% less likely to make child support payments required of non-resident parents. These findings suggest that as borrowers accommodate interest and principal payments on payday loan debt, they prioritize loan payments over other liabilities like child support payments and they turn to transfer programs like food stamps to supplement the household's resources. To establish this finding, the analysis uses a measure of payday loan access that is robust to the concern that lender location decisions and state policies governing payday lending are endogenous relative to household financial condition. The analysis also confirms that the effect is absent in the mid-1990s, prior to the spread of payday lending, and that the effect grows over time, in parallel with the growth of payday lending.View Full Paper PDF
