No abstract

More than 20 million Americans are affiliated with multi-level marketing firms (MLMs), but there is little empirical evidence on who participates in this controversial part of today's labor market. We link data on 350,000 individuals cited in an Federal Trade Commission settlement with one of the largest MLMs to detailed county-level information. We find that the share of refund claimants is greater in areas with higher median income and where women are absent from the labor market, suggesting value in flexible work. However, check amount, a proxy for losses, are correlated with higher inequality and lower social capital, suggesting that the pitfalls accrue to vulnerable groups.

We use detailed household-level data from Denmark to analyze how the introduction of interest-only mortgages affected consumption expenditure and borrowing. Four years after the reform interest-only mortgages constituted 40 percent of outstanding mortgage debt. Using an ex-ante measure of exposure motivated by financial constraints, we show households who are more likely to use an IO mortgage, increased consumption substantially following the reform. The increase in consumption is driven by borrowing at the time of refinancing and by borrowers with lower pre-reform leverage ratios. Our results show changes in the mortgage contract can have large impacts on consumption expenditure.

Labor markets are changing. A recent trend is the rise of alternative work arrangements, most able demonstrated by the rise of Uber and similar companies who supply a product but do not formally employ the individuals who sell those products. The share of employees in alternative work arrangements rose by more than 5 percentage points over the past decade, from 10.7 percent to 15.8 percent of the labor force in the United States, a share that is likely to increase as technology advances. Whether this trend is positive or negative for workers is debated, where proponents argue that workers are now able to flexibly set their own schedules and thereby increase their labor supply, and detractors argue that independent work makes for more volatile income and allows companies to avoid paying benefits to workers.The key in evaluating the relative importance of these two arguments is to understand who participates in alternative work arrangements, since this enables us to determine how many workers are gaining from flexibility and how many are losing from increased insecurity. In this paper we describe the participants in a specific form of intermediated work -direct selling through a Multi-Level Marketing (MLM) firm. In a MLM business, individuals join as independent contractors and sell goods provided by the company to their own customers. The business model relies on individual retailers' commission-based product sales direct to customers and on their ability to recruit new members into the company. More than 5 million Americans had a part or full-time involvement as a business builder in a direct-selling company in 2016, corresponding to approximately 3 percent of the labor force, and the total number of Americans involved with direct selling companies increased 30 percent from 2011 to 2016.We use data from a Freedom of Information Act to the Federal Trade Commission to investigate the geography and determinants of participation with a specific MLM firm. Our data consists of 350,000 individuals who lost money running a MLM business between 2009 and 2015 and whom the FTC reimbursed for a fraction of their losses. We link the participants to a county and examine how county-level determinants correlate with MLM participation, allowing us to evaluate if this type of business attracts individuals who likely value flexibility or if it attracts individuals who would value income security but are unable to achieve it. Because most individuals who join a MLM do not experience any financial gains (in contrast to the often rosy marketing claims), we also evaluate if higher losses are concentrated in areas where individuals can afford them.Our results suggest that MLM incidence is higher in middle-income and in areas with relative female labor force participation. We do not find strong evidence that MLM activity is a substitute for unemployment, but we do find some evidence that MLM activity is correlated with certain types of entrepreneurship. We also find a positive relationship between financial development and MLM incidence...

No abstract