Working Paper: NBER ID: w27782
Authors: J. Anthony Cookson; Erik P. Gilje; Rawley Z. Heimer
Abstract: How do persistent cash flow shocks affect debt repayment across the distribution of households? Using individual data on natural gas shale royalty payments matched with credit bureau data for 215,639 consumers, we estimate that individuals repay 33 cents of debt per dollar of windfall, and that initially-subprime individuals repay approximately 5 times more debt than initially-prime individuals do. This difference in debt repayment is driven by changes to revolving debt balances. Finally, we show that debt repayment precedes durable goods consumption, particularly for households who were initially financially constrained. These results shed new light on how deleveraging affects household consumption.
Keywords: shale gas; household debt; cash flow shocks; debt repayment; marginal propensity to repay
JEL Codes: G5; G50; G51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cash flow shocks from shale royalty payments (G59) | household debt repayment (G51) |
| initial creditworthiness (G21) | household debt repayment (G51) |
| cash flow shocks from shale royalty payments (G59) | changes in revolving debt balances (F34) |
| changes in revolving debt balances (F34) | household debt repayment (G51) |
| household debt repayment (G51) | durable goods consumption (E20) |