Peers' Income and Financial Distress: Evidence from LotteryWinners and Neighboring Bankruptcies

• 成果类型: Article
• 署名作者: Agarwal, Sumit; Mikhed, Vyacheslav; Scholnick, Barry
• 署名单位: National University of Singapore; Federal Reserve System - USA; Federal Reserve Bank - Philadelphia; University of Alberta
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz047
• 发表日期: 2020
• 页码: 433
• 关键词: social interactions; household debt; INEQUALITY; INFORMATION; consumption; prizes; distance; WEALTH; HEALTH; matter

摘要

We examine whether relative income differences among peers can generate financial distress. Using lottery winnings as plausibly exogenous variations in the relative income of peers, we find that the dollar magnitude of a lottery win of one neighbor increases subsequent borrowing and bankruptcies among other neighbors. We also examine which factors may mitigate lenders' bankruptcy risk in these neighborhoods. We show that bankruptcy filers obtain more secured, but not unsecured, debt, and lenders provide additional credit to low-risk, but not high-risk, debtors. In addition, we find evidence consistent with local lenders taking advantage of soft information to mitigate credit risk.