Mingli Zhong , Breno Braga , Signe-Mary McKernan , Mark Hayward , Elizabeth Millward , Christopher Trepel
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Impacts of COVID-19-era economic policies on consumer debt in the United Kingdom
We examine the effects of the Universal Credit expansion and mortgage forbearance on the financial well-being of United Kingdom (UK) residents during the pandemic. Using anonymized individual-level consumer financial data on 2 million UK consumers, each with one or more defaulted accounts accrued before the pandemic, we found that average nonmortgage debt increased by 17% from October 2019 (£5497) to December 2021 (£6456). Using a difference-in-difference approach, we found mixed policy impacts on the debt people carried. Although the expansion of Universal Credit was intended to help financially vulnerable families, consumers who were more likely to benefit from the Universal Credit expansion took on 1% more total nonmortgage debt after the policy expansion. By contrast, during the period of mortgage forbearance, mortgage holders accumulated 1% less total nonmortgage debt compared to nonmortgage holders. These results suggest that policies implemented in the UK to protect financially vulnerable families were insufficient to prevent beneficiaries from accumulating additional debt during the pandemic.
期刊介绍:
Journal of Economics and Business: Studies in Corporate and Financial Behavior. The Journal publishes high quality research papers in all fields of finance and in closely related fields of economics. The Journal is interested in both theoretical and applied research with an emphasis on topics in corporate finance, financial markets and institutions, and investments. Research in real estate, insurance, monetary theory and policy, and industrial organization is also welcomed. Papers that deal with the relation between the financial structure of firms and the industrial structure of the product market are especially encouraged.