Center for Consumer Financial Decision Making: Recent Research Projects (since 2018)

Scholars affiliated with the Center for Research on Consumer Financial Decision Making are actively conducting research on saving, investing, household debt and policy initiatives related to consumer financial decision making. This page surveys our CFDM Center scholars recent research publications and notable working papers since 2018. Please click on the links below to see Center scholars’ research on these topics.




Asaf Bernstein, Peter Koudijs (2020) The Mortgage Piggy Bank: Building Wealth through Amortization​. SSRN, 7 (July), 1-74.

Mortgage amortization schedules are illiquid savings plans comparable in size to pension programs; however, little is known about their effects on wealth accumulation. Using individual administrative data and plausibly exogenous variation in the timing of home purchase (ex. childbirth-driven) around a 2013 Dutch reform, we find a near one-for-one rise in net worth for each dollar of amortization. Households leave other savings and liabilities unchanged, and instead increase labor supply and reduce consumption. Effects hold even for regular savers and older households. This has important macroprudential implications and suggests homeownership financed via amortizing mortgages is instrumental for household wealth building.


Stephen Roll, Michal Grinstein-Weiss, Emily Gallagher and Cynthia Cryder (2019) Can Pre-Commitment Increase Savings Deposits? Evidence from a Tax Time Field Experiment. *Conditional accept at Journal of Economic Behavior & Organization

This paper presents the results of an experiment testing the roles of a savings pre-commitment and different savings-focused choice architectures on the savings deposit decisions of 845,786 low- and moderate-income (LMI) tax filers. Results suggest that pre-committing to save at the start of the tax filing process can, among certain populations, dramatically increase savings rates. Among early tax filers, pre-commitment is associated with a 20.6 percentage point increase in savings deposits and a $418.86 increase in the amount deposited to savings. We observe more modest effects of pre-commitment on a general sample of tax filers. We also see strong evidence that choice architectures emphasizing savings strongly impact the deposit decisions of tax filers. The experiment also revealed cautionary evidence that the structure of pre-commitment can solidify decisions, making it then harder to later nudge those who opt-out of savings to change their minds. These findings may be broadly applicable to settings beyond the tax time moment – such as to applications that seek to encourage particular behaviors (like work or exercise) on the part of its participants.


Emily Gallagher, Jorge Sabat (2019) Rules of Thumb in Household Savings Decisions: Estimation Using Threshold Regression, SSRN, 23 (September), 1-47.

The rules of thumb offered by financial advisors regarding how much to hold in liquid reserves vary widely and usually imply far greater sums than low-income households save. This paper seeks empirically-grounded insights into the minimum liquidity buffer needed by the average low-income household. First, we document diminishing benefits to liquid savings in terms of the likelihood of experiencing financial hardship. Then, we formalize this relationship with a theory of poverty traps. Finally, to observed data, we fit a regression kink model with an unknown threshold (kink) point that must be estimated. Our key finding is that the threshold point is $2,467 with a 95% confidence interval of $1,814–$3,011 (in 2019 dollars) or roughly 1 month of income for the average low-income household – which is far less than the savings amounts implied by common rules of thumb (typically 3–6 months of income). Theoretical evidence suggests that financial advice based on an empirically-estimated threshold point is welfare enhancing for households with naive perceptions of their probability of experiencing financial problems.


Yanwen Wang, Muxin Zhai, John Lynch (2018) Generous to a Fault: The Effect of Employers Retirement Plan Contributions on Leakage from Cashing Out at Job Separation (working paper)

In the United States, "retirement plan leakage" occurs when employees withdraw money prior to retirement and pay a financial penalty for doing so. The vast majority of early leakage from retirement savings system occurs when employees leave a job. We analyze a large data set on employees’ 401(k) contributions and leakage decisions, and we investigate how retirement plan generosity affects the probability and amount of leakage at job termination. Our results suggest that employees respond strategically to employer-based defined contribution plans. An overly generous plan may not unambiguously incentivize employee contributions to retirement savings. The likelihood of leakage at job separation increases with the proportion of employer’s contribution relative to the employee's contribution. We explain this phenomenon using mental accounting concepts. We suggest that the employer’s contribution is likely to be labeled as "free money" and thus subject to early withdrawal. Our counterfactual analysis of how employees respond to modifications of current employer’s matching scheme supports the hypothesis.



Daniel J. Walters & Phillip M. Fernbach (2021). Investor memory of past performance is positively biased and predicts overconfidence. PNAS.

We document a memory-based mechanism associated with investor overconfidence. In Studies 1 and 2, investors were asked to recall their most important trades in the recent past and then reported investing confidence and trading frequency. After the study, they looked up and reported the actual returns of these trades. In both studies, investors were biased to recall returns as higher than achieved, and larger memory biases were associated with greater overconfidence and trading frequency. The design of Study 2 allowed us to separately investigate the effects of two types of memory biases: distortion and selective forgetting. Both types of bias were present and were independently associated with overconfidence and trading frequency. Study 3 was an incentive-compatible experiment in which overconfidence and trading frequency were reduced when participants looked up previous consequential trades compared to when they reported them from memory.


Tony Cookson, Joey Engelberg, Will Mullins (2020) Does partisanship shape investor beliefs? Evidence from the COVID-19 pandemic. SSRNSocArXivReview of Asset Pricing Studies, Volume 10, Issue 4, December 2020, Pages 863–893

We use party-identifying language – like “Liberal Media” and “MAGA”– to identify Republican users on the investor social platform StockTwits. Using a difference-in-difference design, we find that the beliefs of partisan Republicans about equities remain relatively unfazed during the COVID-19 pandemic, while other users become considerably more pessimistic. In cross-sectional tests, we find Republicans become relatively more optimistic about stocks that suffered the most from COVID-19, but more pessimistic about Chinese stocks. Finally, stocks with the greatest partisan disagreement on StockTwits have significantly more trading in the broader market, explaining 28% of the increase in stock turnover during the pandemic.


Tony Cookson, Marina Niessner (2020) Why Don't We Agree? Evidence from an Investor Social NetworkSSRN. Journal of Finance, Vol 75, No 1, (February 2020), pp. 173-228

We study the sources of investor disagreement using sentiment expressed by investors on a social media investing platform, combined with information on the users’ investment approaches (e.g., technical, fundamental). We examine how much of overall disagreement is driven by different information sets versus differential interpretation of the same information, by studying disagreement within and across investment approaches. We find that differences of opinion across investment approaches account for 47.7% of the overall disagreement at the firm-day level. Moreover, changes in our measures of disagreement robustly forecast abnormal trading volume, suggesting that our measures proxy well for disagreement in the wider market. Our findings suggest that improvements to informational efficiency of financial markets by regulators will not completely erode high trading volume and stock market volatility.


Andrew Long, Phil Fernbach, Bart de Langhe (2018) Circle of Incompetence: Sense of Understanding as an Improper Guide to Investment Risk. Journal of Marketing Research, 55(4), 474-488.

Consumers incorrectly rely on their sense of understanding of what a company does to evaluate investment risk. In three correlational studies, greater sense of understanding was associated with lower risk ratings (Study 1) and with prediction distributions for future stock performance with lower standard deviations and higher means (Studies 2 and 3). In all studies, sense of understanding was unassociated with objective risk measures. Risk perceptions increased when we degraded sense of understanding by presenting company information in an unstructured versus structured format (Study 4). Sense of understanding also influenced downstream investment decisions. In a portfolio construction task, both novices and seasoned investors allocated more money to hard-to-understand companies for a risk-tolerant client relative to a risk-averse one (Study 5). Study 3 ruled out an alternative explanation based on familiarity. The results may explain both the enduring popularity and common misinterpretation of the “invest in what you know” philosophy.


Asaf Bernstein, Matthew Gustavson, Ryan Lewis (2018) Disaster on the Horizon: The Price Effect of Sea Level Rise. Journal of Financial Economics, Volume 134, Issue 2, November 2019, Pages 253-272.

Homes exposed to sea level rise (SLR) sell at a 7% discount relative to observably equivalent unexposed properties equidistant from the beach. This discount has grown over time and is driven by sophisticated buyers and communities worried about global warming. Consistent with causal identification of long horizon SLR costs, (1) we find no relation between SLR exposure and rental rates, (2) despite decreased remodeling among exposed homeowners, current SLR discounts are not caused by differential investment, (3) results hold controlling for flooded properties and views. Overall, we provide the first evidence on the price of SLR risk and its determinants. These findings contribute to the mixed literature on how investors price long-run risky cash flows and have implications for optimal climate change policy. Wall Street Journal, Washington Post


Bhagwan Chowdhry, Shaun Davies, and Brian Waters (2018) Investing for Impact. The Review of Financial Studies, Volume 32, Issue 3, March 2019, Pages 864–904,

We study joint financing between profit-motivated and socially motivated (impact) investors and derive conditions under which impact investments improve social outcomes. When project owners cannot commit to social objectives, impact investors hold financial claims to counterbalance owners’ tendencies to overemphasize profits. Impact investors’ ownership stakes are higher when the value of social output is higher, and pure nonprofit status may be optimal for the highest valued social projects. We provide guidance about the design of contingent social contracts, such as social impact bonds and social impact guarantees.


Nick Reinholtz, Phil Fernbach, Bart de Langhe (2018) Do People Understand the Benefit of Diversification? (SSRN) (Forthcoming at Management Science)

Diversification—investing in imperfectly correlated assets — reduces volatility without sacrificing expected returns. While the expected return of a diversified portfolio is the weighted average return of its constituent parts, the variance of the portfolio is less than the weighted average variance of its constituent parts. Our results suggest that very few people have correct statistical intuitions about the effects of diversification. Many people, especially those low in financial literacy, believe diversification actually increases the volatility of a portfolio. These people seem to believe that the unpredictability of individual assets compounds when aggregated together. Additionally, most people believe diversification increases the expected return of a portfolio. Many of these people correctly link diversification with the concept of risk reduction, but seem to understand risk reduction to mean greater return. We show that these beliefs can lead people to construct investment portfolios that mismatch investors’ risk preferences. Further, these beliefs may help explain why many investors are underdiversified. Wall Street Journal


Diego Garcia (2016) The Kinks of Financial Journalism. Working paper.

This paper studies the content of financial news as a function of past market returns. As a proxy for media content we use positive and negative word counts from general financial news columns from the Wall Street Journal and the New York Times. Our empirical analysis allows us to discriminate between theories that predict hyping good stock performance to those that emphasize negative news. The evidence is conclusive: negative market returns taint the ink of typewriters, while positive returns barely do. Given how pervasive our estimates are across multiple time periods, subject to different competitive pressures in the market for news, we conclude our results are driven by demand considerations. Financial Times.



Steve Billings, Emily Gallagher & Lowell Ricketts (2020) Human Capital Investment After the Storm. (May 4, 2020). SSRN

We provide a novel test for the impact of wealth-destroying natural disasters on college decisions using Hurricane Harvey (Aug-Sep 2017). First, we compare enrollment and graduation outcomes at Texas public universities and colleges according to their student share from disaster-affected counties. We find a 9.2% decline in enrollment and a 3.5 percentage point (12.5%) drop in graduation rates at the most exposed relative to the least exposed schools. Risk preferences appear to shift after flooding. Enrollment in majors with high downside risk in earnings, like humanities and general studies, decline in favor of lower downside risk majors, like business and engineering. Next, we turn to student loan data on individuals from Houston. If human capital investment is held constant, a loss in home equity should lead to more student loan financing. Instead, we find college-age adults from flooded areas are 2.5 percentage points (5.7%) less likely to have student loans than are counterparts from non-flooded areas. Flooded mortgage-holders with less initial equity in their homes, particularly those located outside of the floodplain, also see relative declines in student loan borrowing – which is suggestive of liquidity effects. We conclude that Hurricane Harvey lead to delayed and/or forgone education, highlighting a potential long-term impact of natural disasters that may require policy solutions beyond existing disaster assistance programs.


Tony Cookson, Erik Gilje and Rawley Heimer (2020) Shale Shocked: Cash Windfalls and Household Debt Repayment. (August 26, 2020) SSRN

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.


Stephen Billings, Emily A. Gallagher and Lowell Ricket (2019) Let the Rich Be Flooded: The Unequal Impact of Hurricane Harvey on Household Debt. Working paper (2019), *R&R at Journal of Financial Economics

Hurricane Harvey, which submerged 25–30% of Houston in August 2017, is arguably the most generalizable major flooding event. Using a treatment intensity difference-in-difference design, we find substantial heterogeneity in household debt outcomes across flooded residents according to floodplain (flood insurance) status, credit history, income, and housing equity. We observe a small relative decline in Equifax Risk Scores (1–4 points) among residents in the most flooded blocks – likely attributable to a temporary 4–20% jump in the share of debt that is severely delinquent among younger and lower credit quality borrowers living outside of the floodplain. Our most surprising finding is a roughly $2,000 (or 9%) pay down in student debt in the most flooded, higher income areas outside of the floodplain. This effect is driven entirely by people with pre-existing student loans, lower housing equity, and higher credit scores. A plausible interpretation is that some flooded households are exploiting their greater access to more fungible government assistance to eliminate their higher-interest, non-dischargeable debt rather than to rebuild. We believe that this is the first paper to evaluate student debt outcomes as well as the role of differential access to various forms of assistance following a natural disaster.


Asaf Bernstein (2018) Negative Equity, Household Debt Overhang, and Labor Supply. (December 5, 2019). SSRN

I find that negative home equity causes a 2%-6% reduction in household labor supply. I utilize U.S. household-level data and plausibly exogenous variation in the location-timing of home purchases with a single lender. Supporting causality, households are observationally equivalent at origination and equally sensitive to local housing shocks that don’t cause negative equity. Results also hold comparing purchases within the same year-MSA, that differ by only a few months. Though multiple channels are likely at work, evidence of non-linear effects is broadly consistent with costs associated with housing lock and financial distress.


Asaf Bernstein, Daan Struyven (2017) Housing Lock: Dutch Evidence on the Impact of Negative Home Equity on Household Mobility. (December 19, 2017). SSRN

This paper employs Dutch administrative population data to test the “housing lock hypothesis”: the conjecture that homeowners with negative home equity, low levels of financial assets and restricted opportunities to borrow reduce their mobility. We exploit variation in home equity solely driven by the timing of home purchase within a municipality and the harshness of Dutch recourse laws, which allow us to isolate the housing lock channel. Instrumented negative home equity is associated with a 74-79% decline in mobility, and the effects are substantially larger for households with low financial asset holdings or moves over longer distances.


Nelson Camanho, Daniel Fernandes (2016) The Mortgage Illusion. (September 19, 2018) SSRN

We find that home buyers are influenced by the comparison between the monthly rental payment and the monthly mortgage installment, for fixed rate mortgages. Consumers are more likely to buy real estate when the monthly rental payment is higher than the monthly mortgage installment. Our experiments show that the mortgage illusion is not caused by a desire to pay less per month for a mortgage, but by a desire to pay less each month for the rent than for the mortgage. Consumers use the monthly rental payment as a reference point to decide whether to buy a realty. Consumers with greater time discounting are more likely to display the mortgage illusion. Financial literacy and numeracy do not help to overcome this bias.



Christina Kan, Phil Fernbach, and John Lynch Jr. (2018) Personal Budgeting in the Short Run and the Long Run. Working Paper.

Personal budgeting is commonly recommended, and about half of Americans report doing it. Surprisingly, little causal evidence exists testing the efficacy of budgeting for attaining financial goals. We find that budgeting helps people attain their financial goals in the short run, but not in the long run. People who track their budgets are more likely to reduce their net spending after periods of overspending than those who do not track their budgets, consistent with popular press touting of benefits of budgeting. However, budget trackers are also more likely to overspend after periods of fiscal restraint than those who do not track their budgets. The net effect is that budget trackers are no more likely to attain their financial goals.



Joe J. Gladstone, Jon M. Jachimowicz, Adam Eric Greenberg & Adam D.Galinsky (2021). Financial shame spirals: How shame intensifies financial hardship.

Financial hardship is an established source of shame. This research explores whether shame is also a driver and exacerbator of financial hardship. Six experimental, archival, and correlational studies (N = 9,110)—including data from customer bank account histories and several longitudinal surveys that allow for participant fixed effects and identical twin comparisons—provide evidence for a vicious cycle between shame and financial hardship: Shame induces financial withdrawal, which increases the probability of counterproductive financial decisions that only deepen one’s financial hardship. Consistent with this model, shame was a stronger driver of financial hardship than the related emotion of guilt because shame increases withdrawal behaviors more than guilt. We also found that a theoretically motivated intervention—affirming acts of kindness—can break this cycle by reducing the link between financial shame and financial disengagement. This research suggests that shame helps set a poverty trap by creating a self-reinforcing cycle of financial hardship.


Kappes, Heather, Joe Gladstone & Hal Herschfield (2020). Beliefs About Whether Spending Implies Wealth. Journal of Consumer Research.

Spending is influenced by many factors. One that has received little attention is the meaning that people give to the act of spending. Spending money might imply that someone is relatively wealthy—since they have money to spend—or relatively poor—since spending can deplete assets. We show that people differ in the extent to which they believe that spending implies wealth (SIW beliefs). We develop a scale to measure these beliefs and find that people who more strongly believe that SIW spend their own money relatively lavishly and are, on average, more financially vulnerable. We find correlational evidence for these relationships using objective financial-transaction data, including over 2 million transaction records from the bank accounts of over 2,000 users of a money management app, as well as self-reported financial well-being. We also find experimental evidence by manipulating SIW beliefs and observing causal effects on spending intentions. These results show how underlying beliefs about the link between spending and wealth play a role in consumption decisions, and point to beliefs about the meaning of spending as a fruitful direction for further research.


Matz, Sandra & Joe Gladstone (2020). Nice Guys Finish Last: When and Why Agreeableness Leads to Economic Hardship. Journal of Personality and Social Psychology.

Recent research suggests that agreeable individuals experience greater financial hardship than their less agreeable peers. We explore the psychological mechanisms underlying this relationship and provide evidence that it is driven by agreeable individuals considering money to be less important, but not (as previously suggested) by agreeable individuals pursuing more cooperative negotiating styles. Taking an interactionist perspective, we further hypothesize that placing little importance on money—a risk factor for money mismanagement—is more detrimental to the financial health of those agreeable individuals who lack the economic means to compensate for their predisposition. Supporting this proposition, we show that agreeableness is more strongly (and sometimes exclusively) related to financial hardship among low-income individuals. We present evidence from diverse data sources, including 2 online panels (n1 = 636, n2 = 3,155), a nationally representative survey (n3 = 4,170), objective bank account data (n4 = 549), a longitudinal cohort study (n5 = 2,429), and geographically aggregated insolvency and personality measures (n6 = 332,951, n7 = 2,468,897).


Emily N Garbinsky, Joe J Gladstone, Hristina Nikolova, Jenny G Olson (2020). Love, Lies and Money: Financial Infidelity Within Romantic Relationships. Journal of Consumer Research.

Romantic relationships are built on trust, but partners are not always honest about their financial behavior—they may hide spending, debt, and savings from one another. This article introduces the construct of financial infidelity, defined as “engaging in any financial behavior expected to be disapproved of by one’s romantic partner and intentionally failing to disclose this behavior to them.” We develop and validate the Financial Infidelity Scale (FI-Scale) to measure individual variation in consumers' financial infidelity proneness. In 10 lab studies, one field study, and analyses of real bank account data collected in partnership with a couples’ money-management mobile application, we demonstrate that the FI-Scale has strong psychometric properties, is distinct from conceptually related scales, and predicts actual financial infidelity among married consumers. Importantly, the FI-Scale predicts a broad range of consumption-related behaviors (e.g., spending despite anticipated spousal disapproval, preferences for discreet payment methods and unmarked packaging, concealing bank account information). Our work is the first to introduce, define, and measure financial infidelity reliably and succinctly and examine its antecedents and consequences.


Emily Garbinksy & Gladstone, Joe (2019). The Consumption Consequences of Couples Pooling Financial Resources. Journal of Consumer Psychology.

When couples decide to share their lives, they must also decide how to pool their finances. In this article, we ask: Does the type of bank account from which one spends (joint vs. separate) affect the type of products one chooses to buy (utilitarian vs. hedonic)? Real-world evidence from analyzing bank transaction records (study 5), as well as data collected from experiments in the field (studies 1 and 2) and lab (studies 3 and 4), converge to support the hypothesis that couple members who spend from a joint bank account are more likely to choose utilitarian (vs. hedonic) products, than those who spend from a separate bank account. We find that these different spending patterns are driven by an increased need to justify spending to one's partner that is experienced when money is pooled together. If a hedonic product becomes easier to justify (study 4), the effect of account type on spending patterns disappears. These findings have important theoretical and practical implications for better understanding financial decision-making within romantic couples.


James R. Brown, Tony Cookson, and Rawley Heimer (2019) Growing Up without Finance. Journal of Financial Economics, Vol 134, No 3 (December 2019), pp. 591-616.

Early life exposure to local financial institutions increases household financial inclusion and leads to long-term improvements in consumer credit outcomes. We identify the effect of local financial markets using Congressional legislation that led to unintended differences in financial market development across Native American reservations. Individuals from financially underdeveloped reservations enter consumer credit markets later, and upon reaching adulthood, have ten point lower credit scores and four percentage point more delinquent accounts. These effects are long-lived and depreciate slowly after individuals move to more developed areas. Formative exposures to local banking improve consumer credit behavior by increasing financial literacy and financial trust.


Emily Gallagher, Radhakrishnan Gopalan, and Michal Grinstein-Weiss (2018) The Effect of Health Insurance on Home Payment Delinquency: Evidence from ACA Marketplace Subsidies. Journal of Public Economics, Volume 172, April 2019, Pages 67-83.

We use administrative tax data and survey responses to quantify the effect of health insurance on rent and mortgage delinquency. We employ a regression discontinuity (RD) design, exploiting the income threshold for receiving Marketplace subsidies in states that did not expand Medicaid under the Affordable Care Act. Eligibility for subsidies is associated with a roughly 26 percent decline in the delinquency rate and reduced exposure to out-of-pocket medical expenditure risk. IV results indicate that this relationship is likely causal. We show that, under plausible assumptions, the social benefits implied by our RD estimates, in terms of fewer evictions and foreclosures, are substantial relative to the transfer value of the subsidies.


Emily Gallagher, Radhakrishnan Gopalan, Michal Grinstein-Weiss, Jorge Sabat (2018) Medicaid and Household Savings Behavior: New Evidence from Tax Refunds. Journal of Financial Economics, Volume 136, Issue 2, May 2020, Pages 523-546.

Using data on over 67,000 low-income tax filers, we estimate the effect of expanded Medicaid access on the propensity of households to save or repay debt from their tax refunds. We instrument for Medicaid access using variation in state eligibility rules. Medicaid eligibility has no effect on the savings behavior of the average low-income household. However, among those experiencing financial hardship, Medicaid eligibility increases refund savings rates by roughly 5 percentage points or $102. Effects are stronger in states with lower bankruptcy exemption limits and are consistent with a strategic default model, in which uninsured, financially constrained households use bankruptcy to manage health expenditure risk. While modest in absolute terms, our estimates are substantial relative to the effects of direct savings interventions on low-income populations. Our results imply that, as the social safety net expands, tax rebates may be less effective in stimulating consumption


Richard Netemeyer, Dee Warmath, Daniel Fernandes, and John G. Lynch, Jr. (2018) How Am I Doing? Perceived Financial Well-Being, Its Potential Antecedents, and Its Relation to Overall Well-Being.  Journal of Consumer Research, 5 (June), 68-89.

There has been little systematic examination of how perceived financial well-being may affect overall well-being. Using consumer financial narratives, several large-scale surveys, and two experiments, we conceptualize perceived financial well-being as two related but separate constructs: 1) stress related to the management of money today (current money management stress), and 2) a sense of security in one’s financial future (expected future financial security). We develop and validate measures of these constructs and then demonstrate their relationship to overall well-being, controlling for other life domains and objective measures of the financial domain. We find that perceived financial well-being is a key predictor of overall well-being and comparable in magnitude to the combined effect of other life domains (job satisfaction, physical health assessment, and relationship support satisfaction). Further, the relative importance of current money management stress to overall well-being varies by income groups and due to the differing antecedents of current money management stress and expected future financial security. We offer implications for financial well-being and education efforts.


Emily Gallagher, Stephen Roll, Rourke O’Brien, Michal Grinstein-Weiss (2018) Health Insurance and the Earnings Stability of Low-Income Households. SSRN

We evaluate the effect of health insurance on negative earnings shocks using the administrative tax data and survey responses of 4,975 low-income households. We exploit exogenous variation in the cost of private insurance under the Affordable Care Act using a regression discontinuity (RD) design. Eligibility to purchase subsidized private insurance is associated with a 29 and 22 percent decline in the rates of unexpected job loss and income loss, respectively. Effects are concentrated among households with past health costs and exist only for “unexpected” forms of earnings variation, suggesting a health-productivity link. Rudimentary calculations based on our RD estimate imply a $256–$476 per year welfare benefit of health insurance in terms of reduced exposure to job loss.


Quentin André, Nick Reinholtz, John Lynch (2018) Can Food Stamps Reduce Food Consumption? The Unintended Consequences of Restricted-Use Funds on Budgeting Decisions. Working paper.

We investigate the consequences of endowing consumers with resources that can only be spent on a limited range of products. Using a policy-relevant context, we show that consumers who receive a resource akin to food stamps spend less on food than consumers who receive an equivalent amount in money do.



Ward, Adrian, and John G. Lynch, Jr. (2018) On a Need-to-Know Basis: Divergent Trajectories of Financial Expertise in Couples and Effects on Independent Search and Decision Making. Journal of Consumer Research. Summarized in US News June 14, 2018, AARP May 18 2018.

Many consumers suffer from low levels of financial literacy, and attempts to increase this dimension of consumer expertise via educational interventions are typically unsuccessful. We argue that many of these apparent deficits are caused by the distribution of responsibility for knowledge and decision-making between relationship partners. Early in relationships, responsibility for financial matters is often determined not by differences in financial expertise, but by differences in relative contributions to other domains (study 3). Although responsibility may be initially unrelated to ability, responsibility predicts learning of new financial information (study 4). Cross-sectional data from consumers in long-term relationships show that as relationships lengthen, high levels of financial responsibility are associated with increases in financial literacy, whereas low levels of financial responsibility are not (study 1). These diverging trajectories of expertise cannot be explained by role switching or changes in the sample over time (study 2). The resulting gap in financial literacy is linked to corresponding differences in both financial decision-making and financial information search (studies 5, 5a). Consumers develop expertise on a “need to know” basis. Offloading responsibility to a relationship partner may eliminate this need in the present, while simultaneously creating barriers to developing expertise when needed in the future.

Netemeyer, Richard, Donald R. Lichtenstein, John G. Lynch, & David Dobolyi (2020), What You Know and What You Think You Know About Money and Health: Knowledge, Behaviors, and Well-Being (Working Paper). 

Physical and financial health are among the most important domains affecting life satisfaction / subjective well-being (SWB). Separate literatures on “financial literacy” and “health literacy” examine links of knowledge to behavior in each domain. Each literature advocates education aimed to improve well-being in that domain. Work in financial literacy has focused on the role of objective knowledge. Work in health literacy has focused on the role of subjective knowledge and confidence in obtaining and understanding health information. We offer the first examination of how objective and subjective knowledge affects performing positive behaviors within domain and spills over to affect behavior in the other domain. We present three cross-sectional surveys, including a two-wave study assessing how knowledge about money and physical health prior to the COVID pandemic relates to behaviors during the pandemic. Finally, we present a quasi-experiment comparing changes in financial and physical health knowledge over the course of a semester for students enrolled in a personal finance class, a personal health class, or neither. We find consistent effects for subjective knowledge affecting positive behaviors and perceptions of future well-being within and across domains. We also study how subjective knowledge “ripples through a system” of potential mediators to affect SWB.