Working Paper: NBER ID: w25023
Authors: Sarah Miller; Cindy K. Soo
Abstract: This paper isolates the causal impact of neighborhood environment on credit outcomes of low-income borrowers by analyzing the participants of the Moving to Opportunity (MTO) experiment. MTO was a unique, large-scale experiment that offered families vouchers to move to better neighborhoods via randomized lottery. We find higher credit scores and use among those required to move to the lowest poverty areas as young children. For those who moved as adults, we find that better neighborhoods lead to a reduction of overdue debts and delinquencies, but only among those given unrestricted neighborhood choice.
Keywords: credit market; low-income borrowers; neighborhood effects; Moving to Opportunity experiment
JEL Codes: D12; D14; G41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| neighborhood environments (R23) | credit outcomes (F34) |
| moving to lowest poverty neighborhoods (I32) | credit scores (G51) |
| neighborhood choice (R20) | overdue debts (F34) |
| mandatory relocations (J62) | overdue debts (F34) |
| peer effects in neighborhoods (C92) | credit behaviors (G51) |
| better neighborhood environments (R20) | improved credit outcomes (G51) |