UNIVERSITY PARK, Pa. — Benjamin Collier, associate professor and Tuttleman Research Fellow in the Fox School of Business at Temple University, will give the talk, “Credit When You Need It: Recovering from Severe Climate Events,” at noon on Wednesday, March 26, in 157 Hosler Building on the University Park campus.
“Severe climate events pose an increasing threat to households' financial well-being,” Collier said. “Households affected by these events can face a significant financing challenge as disaster expenses and damages may exceed tens or even hundreds of thousands of dollars.”
Collier estimates the causal effect of emergency credit on households’ finances after a negative shock, like a severe climate-related disaster. He links application data from the U.S. Federal Disaster Loan program, which provides loans to households that have uninsured damages from a federally declared natural disaster to a panel of credit records before and after the shock. He said he exploits a discontinuity in the loan approval rules that led applicants with debt-to-income ratios below 40% to be differentially likely to be approved.
“Using an instrumented difference-in-differences research design, we found that credit provision at the time of a shock significantly reduces severe financial distress, decreasing the likelihood of filing for bankruptcy by 61% in the three years following the disaster,” said Collier.
In this talk, Collier will discuss how credit provision in a time of crisis has real consumption effects in the form of additional car purchases even three years after loan receipt. His findings suggest that well-timed liquidity provided to households in acute need can have substantial and persistent positive effects.
Collier’s research focuses on sustainability and severe climate risks. Specifically, he examines how businesses and households financially manage hurricanes and other severe events.
The Initiative for Energy and Environmental Economics and Policy (EEEPI) was established in 2011 with the goal of promoting policy-relevant economics research that lies at the boundary between economic sciences and the study of natural or engineered systems. The EEEPI initiative is focused primarily on the union between energy systems and environmental management and the development of quantitative tools to address decision challenges in these areas. View more information on EEEPI.