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Fed/GFLEC Financial Literacy Seminar Series

October 14, 2021

3:30 PM - 4:30 PM ET

Seminar I: The Impact of Social Insurance on Household Debt

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Sasha Indarte

Assistant Professor of Finance, The Wharton School, University of Pennsylvania





Sasha Indarte is an Assistant Professor of Finance at the Wharton School of the University of Pennsylvania. Her primary areas of research are household finance, banking, and macroeconomics. Her research investigates the causes and consequences of financial distress and using big data, quasi-experimental research designs, and structural models. Her current research focuses on the drivers of personal bankruptcy, the effects of lender asset losses on the credit channel of monetary policy, and the impact of social insurance on household debt. She completed her PhD in Economics at Northwestern University in 2019.


This paper investigates how the expansion of social insurance affects households’ ac-cumulation of debt. Insurance can reduce reliance on debt by lessening the financial impact of adverse events like illness and job loss. But it can also weaken the motive to self-insure through savings, and households’ improved financial resilience can increase access to credit. Using two quasi-experimental research designs, we estimate the causal effect of expanded insurance on household debt, exploiting the staggered expansions of one of the largest US social insurance programs: Medicaid. We find that expanding Medicaid in-creased credit card borrowing by 2.2%. Decomposing this effect in a model of household borrowing, we show that increased credit supply in response to households’ improved financial resilience fully accounts for this rise in borrowing and contributed to 17% of the total welfare gains of expanding Medicaid.