2025/07/14 by Grace Beals · 1 voice
Economics, Econometrics and Finance · Social Sciences · #Banking stability, regulation, efficiency #Housing, Finance, and Neoliberalism #Social Policy and Reform Studies
paper · pdf · doi:10.1111/psj.70055
openalex publication_date 2025/07/14 · openalex created_date 2025/10/10 · openalex updated_date 2026/06/30
ABSTRACT Denizens rely on emergency cash transfers from the government and private credit during economic crises. These two sources work together: when the welfare state falls short, beneficiaries use credit to make ends meet. Existing literature on the credit‐welfare state tradeoff demonstrates how credit use expands to cover shortcomings in government policies. However, we know less about how these two sources interact during economic crises when the welfare state undergoes a sudden expansion. Specifically, how does access to fringe credit change the effect of emergency cash transfers on indebtedness during and following crises? I leverage variation in payday loan regulation to analyze how access to these loans changes the effect of emergency cash transfers. Using a regression discontinuity in time design, I find that in counties with access to payday loans, indebtedness was lower following the COVID‐19 stimulus checks' disbursal in the short run than in counties with low or no access to payday loans. However, the effect in the long run is more mixed. This suggests that the stimulus checks' effect on indebtedness varies by the state‐level credit regulatory environment. The results illustrate that the same emergency policy can have materially different results based on beneficiaries' access to credit.