, Volume 45, Issue 1, pp 91-115
Date: 15 Nov 2012

On Consumer Credit Outcomes in the U.S.-Mexico Border Region

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The ease in mobility of people across the U.S.-Mexico border region provides a natural setting for analyzing the role of economic interdependency on consumer credit outcomes. Since the U.S. and Mexican economies are not entirely synchronized and have different growth rates, the growing Mexican border economy is likely to increase the consumption of U.S. goods and services in the region, and provide additional job opportunities to the U.S. border residents. Thus, the effect of being located at the border (‘border effect’) might reduce default and bankruptcy in the U.S. However, if both economies are nearly perfectly correlated, then the ‘border effect’ is likely to be insignificant. Our results are consistent with the border effect lowering the rate of bankruptcies and mortgage defaults in the U.S. counties that share a border with Mexico. An increase in the level of economic interdependency, as measured by the differential economic growth between Mexican municipalities and their sister U.S. county, decreases the bankruptcy rates in the U.S. border region. Overall, this research helps understand credit risk issues in the U.S.-Mexico border region.

We are enormously grateful to the anonymous reviewer for the constructive suggestions which have significantly improved the paper. The encouragement from the Editor (David Musto) on our chosen research question and his comments are also appreciated. We also thank Alexander Baptista, Gregory Elliehausen, Diego Escobari, David Mather, Harald Oberhofer, Leslie Papke, and seminar participants at the University of Texas-Pan American for their suggestions. Some portion of the data collection for this research was completed while Desai was at The George Washington University. Lizeth Marroquin and Khoa Nguyen provided excellent research assistance. Desai is particularly grateful to his wife, Ditina, for painstakingly proofreading all the versions of the manuscript and helping to make it as reader-friendly as possible. We are solely responsible for errors and omissions.