Essays in Household Finance

Abstract

This dissertation consists of two chapters on households' decision-making in anticipation of uncertain financial outcomes. The first chapter analyzes how households, facing uncertainty about future displacements and the value of their human capital, respond to the threat of automation. I link workers' subjective displacement expectations to their direct and social exposure to a disruptive technology: autonomous vehicles (AVs). I find that commercial driver licensing and truck-driving employment fall disproportionately in more AV-exposed areas. Remaining drivers extend their work hours and reduce mortgage market participation relative to less-exposed neighboring drivers. Changes in household spending on alcohol and tobacco products are consistent with heightened automation-induced anxiety. The results indicate that perceived displacement risk affects households' labor supply, credit behavior, and health, informing welfare assessments and policy responses to automation. The second chapter turns to liabilities on household balance sheets, specifically student loans. We evaluate the immediate consumption response to President Biden's 2022 loan forgiveness announcement, which promised meaningful but uncertain debt relief for approximately 42 million borrowers. Retail stores in counties with a 1 percentage point higher share of eligible student loan borrowers saw a persistent 0.1% increase in weekly sales. This spending response was absent in counties with high shares of financially delinquent households, consistent with delinquent borrowers being liquidity constrained and unable to smooth consumption. Novel data on debt relief eligibility and applications suggest that student loan borrowers anticipated relief they ultimately did not receive and adjusted their spending in response.