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

Project Summary:

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.

What can 5 million households tell us about the impact of credit access on job finding and wage inequality?

Project Summary:

This project will bring together macroeconomic theory and large-scale microeconomic datasets to advance modern economics and inform monetary and public policy. Using employment records merged to credit reports, the authors will estimate the impact of credit access on the job-finding rates and re-employment earnings of displaced workers. Past research has examined the borrowing and credit use of the unemployed, and this study builds on that line of work to examine the direct impact of credit on future outcomes. In preliminary results, the authors find that credit access increases the time before re-employment, but also increases average salary once a new job is found. This work will develop a search model capable of explaining these new findings.


Gordon Phillips is the C.V. Starr Foundation Professor and Academic Director of the Center for Private Equity and Entrepreneurship at the Tuck School of Business at Dartmouth College. He is also a research associate at the National Bureau of Economic Research and a visiting research professor at Tsinghua University in Beijing. He previously taught at the University of Southern California and the University of Maryland. He received his MA and Ph.D. from Harvard University and his undergraduate degree from Northwestern University.

His areas of research include corporate finance and how financial decisions impact firms' strategic decisions, and contracting in financial markets. His work in corporate finance includes studies of private equity issuance, capital structure, Chapter 11 bankruptcy, how leverage buyouts and other forms of high debt influence a firms' and rivals' investment decisions.

Recent research published in the Review of Financial Studies has been on applying computational linguistics to firm financial statements to analyze merger synergies, dividends and product market competition. Research published in the Journal of Finance has been on real and financial booms and busts and mergers and acquisitions and how firms organize across multiple markets. He recently presented the keynote address on PIPEs (private investment in public equity) to an audience of executives and finance professionals. He has served as an associate editor at The Review of Financial Studies and The Journal of Corporate Finance.

Selected Publications