Research

Working Papers

Barriers to Debt Relief through Bankruptcy: Evidence on the Filing Decision from a Legal Technology Platform (with Samuel Antill and Eleanor Jenke), March 2025. Working Paper.

Abstract: Millions of households could increase their net worth by filing for bankruptcy, yet fewer than 10% of these households file each year. We study 15,186 debtors considering bankruptcy who have an average benefit from filing of $42,000 (approximately 20 months of household income), just 51% of whom file. We show that many households are deterred by a $338 filing fee. In a regression discontinuity design that exploits an income threshold for obtaining a waiver of the filing fee, we estimate that the fee causally reduces filing rates by 6.4 percentage points (12.5%). Marginally deterred debtors mirror filers, except that they lack liquid assets and have even higher levels of debt. Our results highlight that even relatively small fees can impede the targeting of social insurance.

Press Coverage of the Prospective Filers Survey: NBC News

Consumption Wedges: Measuring and Diagnosing Distortions (with Sasha Indarte, Ulrike Malmendier, and Michael Stepner), December 2024. Working Paper.

Abstract: A variety of distortions, such as financial constraints and behavioral biases, have been proposed to explain deviations from canonical consumption-savings models. We develop a new sufficient statistics approach to measure the impact of such distortions on consumption as a wedge between actual consumption and a counterfactual ”frictionless” consumption. We calculate these wedges for a population of predominantly low-income US consumers using a new survey of economic beliefs linked to bank account transactions data. We find that consumption choices are significantly distorted both upwards and downwards. The median wedge is 40% of frictionless consumption in absolute value, with 51% having negative wedges (under-consuming) and 49% having positive wedges (over-consuming). Because alternative models of distortions imply different properties of wedges, estimates of wedges can be used as a diagnostic to distinguish between models. Notably, financial constraints only generate negative wedges, indicating that additional or alternative distortions (such as present bias or consumer inertia) are necessary to rationalize the consumption decisions of low-income households.

Publications

The Effects of Medical Debt Relief: Evidence from Two Randomized Experiments (with Neale Mahoney, Francis Wong, and Wesley Yin) Forthcoming at The Quarterly Journal of Economics, December 2024. Online Appendix. Working Paper, NBER Working Paper #32315, CESifo Working Paper #11074. J-PAL Summary. Op-Ed on Policy Implications.

Abstract: Two in five Americans have medical debt, nearly half of whom owe at least $2,500. Concerned by this burden, governments and private donors have undertaken large, high-profile efforts to relieve medical debt. We partnered with RIP Medical Debt (now Undue Medical Debt) to conduct two randomized experiments that relieved medical debt with a face value of $169 million for 83,401 people between 2018 and 2020. Our experiments focused on downstream medical debt that had been sold to debt collectors, and one of our experiments straddled an industry-wide pullback in the reporting of medical debt to the credit bureaus, allowing us to estimate the effects of debt relief with and without counterfactual reporting. We track outcomes using credit reports, collections account data, and a multimodal survey. There are three sets of results. First, we find a modest improvement in credit access when there is counterfactual credit reporting, but no impact on credit report outcomes when there is not. Second, we estimate that debt relief causes a moderate but statistically significant reduction in payments of existing medical bills. Third, we find no effects on survey measures of mental and physical health, healthcare utilization, and financial wellness. Taken together, our results indicate that the strong correlations documented in prior research do not translate into causal effects for downstream medical debt relief.

Press: New York Times, The Guardian, Bloomberg, Vox (article), The Atlantic, Vox Today, Explained (Podcast), Forbes, St. Louis Public Radio, Tradeoffs Podcast, SIEPR, HBS Working Knowledge

Pre-Registrations: J-PAL Experiment Overview. AEA Pre-registration 1 (Old Debt). AEA Pre-registration 2 (New Debt). AEA Pre-registration 3 (Survey Outcomes).

Pay-As-You-Go Insurance: Experimental Evidence on Consumer Demand and Behavior. The Review of Financial Studies 37(4), April 2024: 1118-1148. Ungated version. AEA Pre-registration. Replication Kit. 

Abstract: Pay-as-you-go contracts reduce minimum purchase requirements which may increase market participation. We randomize the introduction and price(s) of a novel pay-as-you-go contract to the California auto insurance market where 17 percent of drivers are uninsured. The pay-as-you-go contract increases take-up by 10.8 p.p (89%) and days with coverage by 4.6 days over the three-month experiment (27%). Demand is relatively inelastic and pay-as-you-go increases insurance coverage in part by relaxing liquidity requirements: most drivers’ purchasing behavior is consistent with a cost of credit in excess of payday lending rates and 19 percent of drivers have a purchase rejected for insufficient funds.

Media: HBS Working Knowledge

The Impact of Financial Assistance Policies on Health Care Utilization: Evidence from Kaiser Permanente (with Alyce Adams, Neale Mahoney, Francis Wong, Jinglin Wang, and Wesley Yin) American Economic Review: Insights 4(3), September 2022: 389-407. Online Appendix. Replication Kit.

Abstract: Most hospitals have financial assistance programs for low-income patients. We use administrative data from Kaiser Permanente to study the effects of financial assistance on health care utilization. Using a regression discontinuity design based on an income threshold for program eligibility, we find that financial assistance increases the likelihood of inpatient, ambulatory, and emergency department encounters by 3.6pp (59 percent), 13.4pp (20 percent), and 6.7pp (53 percent), respectively, though effects dissipate three quarters after program receipt. Financial assistance also increases the detection and management of treatment-sensitive conditions (e.g., drugs treating diabetes), suggesting that financial assistance may increase receipt of high-value care.

Early Withdrawal of Pandemic Unemployment Insurance: Effects on Earnings, Employment and Consumption (with Kyle Coombs, Arindrajit Dube, Calvin Jahnke, Suresh Naidu, and Michael Stepner) American Economic Association: Papers & Proceedings 112, May 2022: 85-90. Non-technical Summary.

Abstract: We examine the effects of the sudden withdrawal of expanded pandemic unemployment benefits in June 2021 using anonymized bank transaction data for 16,130 individuals receiving UI in April 2021. Comparing the difference in differences between states withdrawing and retaining expanded UI, we find that UI receipt falls by 36 p.p. while employment rises by only 7 p.p. by early September. Average cumulative UI benefits fall by $2,538 while average cumulative earnings increase by only $304. Heterogeneity by unemployment duration implies that these effects are primarily driven by extensive margin expiration of benefits, rather than intensive margin reductions in the benefit level.

Press: New York Times, The Economist, Washington Post, NPR, CNBC, Reuters, Business Insider, Yahoo, 2025 Economic Report of the President

Trends in Medical Debt During the COVID-19 Pandemic (with Benedict Guttman-Kenney, Neale Mahoney, Francis Wong, Xuyang Xia, and Wesley Yin) JAMA Health Forum 3(5):e221031, May 2022.

Findings: Medical and nonmedical debt during the pandemic followed the prepandemic downward trends, with proportionally similar declines across zip code income quintiles. There was no statistically significant association between the percentage change in medical debt and the measures of pandemic severity. 

Medical Debt in the US, 2009-2020 (with Neale Mahoney, Francis Wong, and Wesley Yin) JAMA 326(3), July 2021: 250-256. Online Appendix.

Findings: In this retrospective analysis of credit reports for a nationally representative 10% panel of individuals, an estimated 17.8% of individuals in the US had medical debt in collections in June 2020 (reflecting care provided prior to the COVID-19 pandemic). Medical debt was highest among individuals who lived in the South and in zip codes in the lowest income deciles and became more concentrated in lower-income communities in states that did not expand Medicaid.

Press: New York Times, Vox, Washington Post (2021), Washington Post (2023), Marketwatch, CBS Evening News, Marketplace, Bloomberg, Full List of Outlets

The Economic Consequences of Bankruptcy Reform (with Tal Gross, Feng Liu, Matthew Notowidigdo, and Jialan Wang) American Economic Review 111(7), July 2021: 2309-2341.  Online Appendix. Replication Kit.

Abstract: A more generous consumer bankruptcy system provides greater insurance against financial risks but may also raise the cost of credit. We study this trade-off using the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which increased the costs of filing for bankruptcy. We identify the effects of BAPCPA on borrowing costs using variation in the effects of the reform across credit scores. We find that a one-percentage-point reduction in bankruptcy filing risk decreased credit card interest rates by 70–90 basis points. Conversely, BAPCPA reduced the insurance value of bankruptcy, with uninsured hospitalizations 70 percent less likely to obtain bankruptcy relief after the reform.

Press: New York Times (cited), NBER Digest

Myth and Measurement — The Case of Medical Bankruptcies (with Carlos Dobkin, Amy Finkelstein, and Matthew Notowidigdo) New England Journal of Medicine 378(12), March 2018: 1076-1078.

Press: New York Times, Associated Press, Newsweek, Washington Post, Washington Post (FactCheck)

The Economic Consequences of Hospital Admissions (with Carlos Dobkin, Amy Finkelstein, and Matthew Notowidigdo) American Economic Review 108(2), February 2018: 308–352. Online Appendix. Replication Kit.

Abstract: We use an event study approach to examine the economic consequences of hospital admissions for adults in two datasets: survey data from the Health and Retirement Study, and hospitalization data linked to credit reports. For non-elderly adults with health insurance, hospital admissions increase out-of-pocket medical spending, unpaid medical bills, and bankruptcy, and reduce earnings, income, access to credit, and consumer borrowing. The earnings decline is substantial compared to the out-of-pocket spending increase, and is minimally insured prior to age-eligibility for Social Security Retirement Income. Relative to the insured non-elderly, the uninsured non-elderly experience much larger increases in unpaid medical bills and bankruptcy rates following a hospital admission. Hospital admissions trigger fewer than 5 percent of all bankruptcies in our sample.

Press: Washington Post (Wonkblog), New York Times, Vox

Beyond Statistics: The Economic Content of Risk Scores (with Liran Einav, Amy Finkelstein, and Paul Schrimpf) American Economic Journal: Applied Economics 8(2), April 2016: 195-224. Replication Kit.

Abstract: "Big data" and statistical techniques to score potential transactions have transformed insurance and credit markets. In this paper, we observe that these widely-used statistical scores summarize a much richer heterogeneity, and may be endogenous to the context in which they get applied. We demonstrate this point empirically using data from Medicare Part D, showing that risk scores confound underlying health and endogenous spending response to insurance. We then illustrate theoretically that when individuals have heterogeneous behavioral responses to contracts, strategic incentives for cream-skimming can still exist, even in the presence of "perfect" risk scoring under a given contract.

Resting Papers

Bankruptcy and the COVID-19 Crisis (with Jialan Wang, Jeyul Yang, and Ben Iverson). September 2020. See my coauthors' webpages for updated versions of this paper.

Abstract: We examine the impact of the COVID-19 economic crisis on business and consumer bankruptcies in the United States using real-time data on the universe of filings. Historically, bankruptcies have closely tracked the business cycle and contemporaneous unemployment rates. However, this relationship has reversed during the COVID-19 crisis thus far. While aggregate filing rates were very similar to 2019 levels prior to the severe onset of the pandemic, filings by consumers and small businesses dropped dramatically starting in mid-March, contrary to media reports and many experts' expectations. The total number of bankruptcy filings is down by 27 percent year-over-year between January and August.

Press: Wall Street Journal, The Economist (Daily Chart), Oxford Business Law Blog, Promarket at Chicago Booth  

Information Frictions and Insurer Plan Design: Evidence from Medicare Advantage (with Evan Mast) 

Abstract:  Behavioral frictions in insurance exchanges affect not only the plan a consumer selects, but also the menu of plans insurers offer. We investigate an information friction in Medicare Advantage—beneficiaries pay two premiums, and one is much more salient. We find a larger demand elasticity for the salient versus non-salient premium. A model of insurer plan design produces simulated premiums matching the observed distribution using these “behavioral” elasticities, but not when assuming equal elasticities across the two premiums. Removing the friction increases enrollment in low-premium plans, increasing consumer surplus $5 per year with supply fixed and $73 per year when including a supply response.