Essays on Household Finance

Sammanfattning: The thesis consists of three self-contained essays on household finance. “Pawn Credit and the Importance of Financial Exclusion” explores the importance of access to regular credit to the demand for pawn credit. I find that the rejection of one's loan application by a regular bank increases the probability that one will take pawn credit, on average, by 9 percent, relative to individuals whose loan application has been granted. However, of all pawn credit borrowers, 73 percent do not even try to get regular bank credit first. For these borrowers, I find that 93 percent are implicitly excluded from regular bank credit at the time they decide to take pawn credit.“Should Credit Remark Be Forgotten? Evidence from a Legally Mandated Removal” (with Leonard Nakamura) analyzes what happens when Swedish law mandates the removal of credit remarks from credit reports after three years. We find that removal induces an abrupt improvement in individuals' credit scores, an improvement that is not reversed in the long run. Further, the excess loan applications caused by the boost in creditworthiness translate into significant access to new credit. We find evidence that only a minority of the individuals who received a credit remark may be inherently high risk which suggests that credit remark removal is welfare enhancing.“Accept or Reject: Do Immigrants Have Less Access to Bank Credit? Evidence from Swedish Pawnshop Customers” asks if immigrants have less access to mainstream credit than their Swedish born counterparts. I find that immigrants are six percent less likely to be accepted when applying for mainstream credit, relative to Swedish born. This holds in particular for immigrants of African descent, who are 15 percent less likely. This effect disappears for second-generation immigrants with African parents. Immigrant pawnshop borrowers that do not apply for mainstream credit before they take pawn credit are found to make well-informed decisions.