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- Title
Minimum Wages and Consumer Credit: Effects on Access and Borrowing.
- Authors
Dettling, Lisa J; Hsu, Joanne W
- Abstract
This paper examines how minimum wages affect lender and borrower interactions with consumer credit markets. We find that higher state minimum wages increase the supply of unsecured credit, reduce payday loan usage, decrease delinquency, and increase credit scores. Overall, minimum wages reduce borrowing costs and have positive spillover effects on disposable income and liquidity. A back-of-the-envelope of the cost savings indicates that higher minimum wages increase disposable income by 1.3% more than implied by estimates of the direct effect on earnings.
- Subjects
MINIMUM wage; CONSUMER credit; MONEYLENDERS; DEBTOR &; creditor; PAYDAY loans; EXTERNALITIES
- Publication
Review of Financial Studies, 2021, Vol 34, Issue 5, p2549
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/hhaa091