Essays on credit access and individual welfare

Abstract

This dissertation studies the role of credit access in improving individual welfare in the economy with labor market frictions. Using a unique setting in Korea, it uses a regression discontinuity design to show the impact of credit access on medical and occupational outcomes. I find that access to credit can make a life-or-death difference to the poor even when medical treatment is affordable. The poor often delay seeking medical treatment even if they don’t need to pay the medical fee, to avoid losing income due to missed workdays. I find that access to credit can remedy this issue by making it possible for individuals to take time off from work to seek medical care. Individuals with better credit access utilize more medical services and seek treatment more promptly leading to early diagnoses, timely treatments, and ongoing medical attention. These results are critical, as they suggest that credit access can reduce mortality rate by as much as 70%. Access to credit can also improve labor mobility. The results show that individuals with better credit access were 33.7 percent more likely to switch jobs compared to the otherwise similar individuals. The higher switching rates and subsequent wage improvements in response to credit availability suggest that credit frictions impede labor mobility. The results also show that individuals with credit access are more likely to switch to employers in a different industry and move to other occupations, consistent with credit availability increasing the propensity to take greater risks in changing employers.

Date of Award	2023
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology
Supervisor	Vidhan Krishan GOYAL (Supervisor)