Working Papers

  • Liquidity Based Contracting: A Path to Greater Efficiency in Payday Lending [Job Market Paper]

    Presented at: Columbia Business School ● Consumer Finance Protection Bureau x2 ● Federal Reserve Bank of Philadelphia x2 ● Federal Reserve Board x2 ● Georgia Tech, Scheller ● Stockholm School of Economics ● Office of Financial Research, Treasury ● Federal Deposit Insurance Corporation ● AFFECT ● Federal Reserve Bank of Atlanta ● WFA 2024: Early Career Women in Finance Conference ● Junior Household Finance Seminar Series x2● Morehouse College Research Colloquium

    The $15b payday loan market is criticized for its excessively high prices and high loan-renewal rates. In this paper, I study how payday loan borrower welfare can improve by examining these criticisms. First, I use bank-transaction level data on household spending, income, and payday loan activity to document three novel stylized facts on borrowers. Together, they suggest that a payday borrower is poor, has volatile income, and uses payday loans to smooth baseline consumption needs after an adverse idiosyncratic income shock. Second, I use these findings to motivate a short-term lending model. The equilibrium contract in a fleshed-out model with asymmetric information and rate caps matches the real-life payday loan contract when borrowers have low expected income and high income volatility relative to the initial loan and baseline consumption needs. Third, I calibrate my model using my bank-transaction dataset. I find that, relative to borrower utility in my calibrated model, welfare increases between 5% and 28.7% when rollover fees are decreased, initial fees are increased, and lender profit is held constant. However, this increase is not monotonic, and points of inflection vary with the loan amount, suggesting that considering this dimension in contracts is necessary.

  • [Jan 2025: New Draft!] Social Funding of Emergency Healthcare to Uninsured Patients (joint with Ujjal Mukherjee and Sridhar Seshadri)

    [previously circulated as Efficient Mechanism for Joint Allocation of Social Funding of Emergency and Primary Healthcare Delivery to Uninsured Patient Populations]

    Presented at: Purdue University ● Columbia Business School ● UIUC

    For the past 35 years, uninsured emergency care has been primarily federally funded through Medicaid's Disproportionate Share Hospital (DSH) payments, which totaled $16b in 2023. This paper models and estimates the inefficiencies of the competitive DSH mechanism. We find that the number of patients that receive emergency care is tied to the funding through the marginal cost of care inflated by the share of all other hospitals. Hospitals make relatively smaller capacity increases per additional dollar received, while more efficient and more profitable hospitals get more DSH funds. Less profitable hospitals are disfavored in a spiraling manner: receiving less DSH compensation limits their ability to expand capacity, which in turn further reduces their share of future DSH payments. After calibrating and validating our model with hospital-level financial and operations data, our counterfactual analysis shows that an alternative direct reimbursement mechanism, based on actual costs, reduces the loss of social welfare by 15% to 30%, equivalent to between $80m and $700m in savings. Finally, we find DSH savings come from exactly those more profitable hospitals.

Work-in-progress

  • Introducing Installment Loans: Low-Income Borrower Behavior and Welfare (joint with Robert A. Farrokhnia and Michaela Pagel)

    Presented at: Columbia Business School

    How does low-income borrower behavior and welfare vary with the design and duration of a short term, small dollar contact? In the U.S. there is a recent trend of traditional payday lenders newly offering installment loans, which have higher principal amounts, and a higher frequency of smaller payments over a longer contract term. However, even given the controversial nature of payday lending, the impact of this shift on borrowers has not been studied. For identifi cation, we use a 2019 policy change in Florida, which allows payday lenders to offer installment loans as a new product. Using daily transaction level data of U.S. households, provided by a non-pro t Fintech app, we utilize a differences-in-differences (DID) methodology. We find that after the policy is enacted, there are a higher number of repayments, per loan extended, and when given the option, borrowers are choosing installment lending over traditional payday loans.

  • Bank Fees and Household Financial Well Being (joint with Michaela Pagel and Emily Williams) [Draft upon request]

    Presented at: Junior Household Finance Seminar Series ● Georgia Tech, Scheller ● 2025 Boulder Colorado Consumer Finance Conference (Poster)