Working Papers

The Financial Lives of Families. How Credit Regimes and Welfare States Shape Household Indebtedness

Debt has become an essential part of many families' daily lives. In this paper, I propose a theoretical framework that suggests that credit markets fill the gap between families' financial needs and welfare states' financial support. Individuals increasingly go into debt to "move onward" and address social risks as well as to "move upward" and seize social opportunities. As these responsibilities shift from the public sphere onto individuals, credit markets emerge as private alternatives to social policies in cases where permissive credit regimes enable individuals to more easily borrow money. I substantiate this theory with three empirical tests. First, I demonstrate considerable cross-national variation in coping mechanism in response to unemployment. Second, I show that credit only emerges as an alternative to welfare states in countries with permissive credit regimes. Finally, I compare Danish and American households using event studies and difference-in-differences designs to document how different degrees of risk protection in both countries leads to differential rates of borrowing. These findings have socio-economic and political consequences for wealth inequality, support for the welfare state, and social solidarity.

Borrowing as a Social Safety Net? How Credit Markets Substitute for Welfare States and Influence Social Policy Preferences

In many advanced economies, household debt levels have grown considerably during the past decades. Yet we know little about the political causes and consequences of easier access to credit and rising debt. I argue that credit has become a private alternative to the welfare state. Households increasingly go into debt to smooth income losses and pay for basic social services. This credit-based insurance has policy feedback effects on individuals' social policy preferences. Using micro-level panel data in the U.S. and leveraging variation in unemployment insurance benefits and interest rates across states and over time, I first demonstrate that households borrow more in states where unemployment benefits are less generous. I then show that individuals become less supportive of social insurance policies as borrowing conditions ease. This is driven by higher-income households and respondents who favor a limited role of the government and think they pay more taxes than they should.

The Anxiety of Precarity: The United States in Comparative Perspective (with Kathleen Thelen and Bruno Palier)

This paper develops a new perspective on the dynamics of precarity andThis paper develops a new perspective on the dynamics of precarity and socio-economic risk across the most advanced industrial countries by introducing the concept of "risk amplification." A growing number of people are experiencing heightened risk relating to trends in labor markets, social policy regimes, and in some cases in personal finance. We situate developments in the United States in a broader comparative framework to identify the characteristics it shares with other rich democracies as well as the distinctive ways in which precarity manifests itself in the American context. We argue that the US stands out for the way it combines uncommonly high levels of individual-level exposure to risks of various sorts with low levels of collectively provided insurance to mitigate the impact of these risks. Moreover, we show that the institutions of the American political economy if anything operate to compound risk, actively promoting what we call risk amplification, as misfortune in one arena spreads to foment misfortune in others.

The Politics of Personal Responsibility, Credit, and the Welfare State: New Survey Evidence from the U.S. (with Tess Wise)

Personal responsibility is a prominent theme in the politics of the American welfare state as can be seen in the name of the 1996 welfare reform "Personal Responsibility and Work Opportunity Act." We collect new survey evidence on the relationship between personal responsibility, access to credit, and support for the welfare state in the United States. We find that a strong belief in personal responsibility predicts support for private over public spending in the areas of education, social security, and unemployment insurance. The marginal effect of a belief in personal responsibility on these social policy spending preferences is substantively large and remains statistically significant even after controlling for partisanship, education, income, and a host of other factors. We find that perceptions of access to credit moderate this relationship in the areas of education and unemployment insurance with the effect of personal responsibility on policy spending preferences being strongest when access to credit is perceived to be easy and significantly attenuated when access to credit is perceived to be difficult. This suggests that support for the welfare state in the United States is influenced by the interaction between beliefs about personal responsibility and access to credit.

Work in Progress

Household Balance Sheets and Social Policy Preferences: New Cross-National Survey Evidence (with Jacob Gerner Hariri, Amalie Sophie Jensen, and David Dreyer Lassen)

Wealth and Policy Preferences: A Cross-National Survey Project (with Jacob Gerner Hariri, Amalie Sophie Jensen, and David Dreyer Lassen)