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The democratization of credit and the rise in consumer bankruptcies
Livshits, Igor
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MacGee, James
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Tertilt, Michèle
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Livshits,_McGee,_Tertilt_14-07.pdf
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URL:
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https://madoc.bib.uni-mannheim.de/35935
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URN:
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urn:nbn:de:bsz:180-madoc-359353
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Dokumenttyp:
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Arbeitspapier
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Erscheinungsjahr:
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2014
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Titel einer Zeitschrift oder einer Reihe:
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Working Paper Series
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Band/Volume:
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14-07
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Ort der Veröffentlichung:
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Mannheim
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Sprache der Veröffentlichung:
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Englisch
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Einrichtung:
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Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > Makro- u. Entwicklungsökonomie (Tertilt 2010-)
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MADOC-Schriftenreihe:
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Department of Economics > Working Paper Series
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Fachgebiet:
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330 Wirtschaft
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Fachklassifikation:
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JEL:
E21 , E49 , G18 , K35,
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Freie Schlagwörter (Englisch):
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Credit Cards , Endogenous Financial Contracts , Bankruptcy
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Abstract:
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Financial innovations are a common explanation for the rise in credit card debt and bankruptcies. To evaluate this story, we develop a simple model that incorporates
two key frictions: asymmetric information about borrowers’ risk of default and a fixed cost of developing each contract lenders offer. Innovations that ameliorate asymmetric information or reduce this fixed cost have large extensive margin effects via the entry of new lending contracts targeted at riskier borrowers. This results in more defaults and borrowing, and increased dispersion of interest rates.
Using the Survey of Consumer Finances and Federal Reserve Board interest rate
data, we find evidence supporting these predictions. Specifically, the dispersion of
credit card interest rates nearly tripled while the “new” cardholders of the late 1980s
and 1990s had riskier observable characteristics than existing cardholders. Our calculation suggest these new cardholders accounted for over 25% of the rise in bank
credit card debt and delinquencies between 1989 and 1998.
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 | Dieser Eintrag ist Teil der Universitätsbibliographie. |
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 Suche Autoren in
BASE:
Livshits, Igor
;
MacGee, James
;
Tertilt, Michèle
Google Scholar:
Livshits, Igor
;
MacGee, James
;
Tertilt, Michèle
ORCID:
Livshits, Igor, MacGee, James and Tertilt, Michèle  ORCID: https://orcid.org/0000-0003-0605-4141
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