The Household Debt Laffer Curve: next Research Seminar of Institute of FinanceGyöngyösi Győző, Assistant Professor of Utrecht School of Economics, Utrecht University will give an on-site lecture on the impact of debt relief.
Date: 16 October, 2023, Monday, 11:40-1:00 (Budapest time)
Venue: Corvinus Main Building, Second Floor, Room E.279.1
More information: https://sites.google.com/view/institue-monday-seminars/schedule
Abstract: The Debt Laffer Curve relates the net present value of debt to its face value. Debt forgiveness directly reduces the face value but can indirectly increase the net present value by increasing repayment rates. In theory, the latter effect can dominate for heavily indebted borrowers, generating a hump-shaped Debt Laffer Curve. We estimate the impact of a large-scale household debt relief program in Hungary, which reduced outstanding debt burdens by 20\%. Using regression discontinuity and difference-in-differences research designs, we find that debt relief persistently lowered default rates, especially for heavily indebted borrowers. The estimated Debt Laffer Curve is concave and inverts for highly indebted borrowers. Debt relief generates an increase in labor income that accounts for part of the increase in repayment rates, consistent with debt overhang.
Click here to access the author’s website. https://sites.google.com/view/gyozogyongyosi
Please note that this Microsoft Teams link is only in case you are unable to join the seminar in the Corvinus University of Budapest, room E.279.1. However, the meeting will be generally held offline.