The impact of consumer credit access on employment, earnings, and entrepreneurship

Grant description:

This project studies access to credit, via bankruptcy flag removal, on several key outcomes of interest, including business formation rates, earnings and profitability. The research could provide a valuable contribution to our understanding of how microeconomic outcomes affect macroeconomic performance via the innovation channel. This connection is an important one that researchers have not been able to make in an empirically rigorous way to date. The basis of this project is the data: the authors will merge individual employment records from the U.S. Census Bureau with individual 1040 Schedule C tax returns and individual TransUnion credit reports. In addition to having clear implications for bankruptcy law, the study suggests important connections between credit access and employment, and also has potential implications for policy responses to the next economic downturn, given that credit access and debt forgiveness may impact macroeconomic growth in ways that are not well understood.