Information Asymmetries in Consumer Credit Markets: Evidence from Payday Lending

By Will Dobbie and Paige Marta Skiba

American Economic Journal: Applied Economics, October 2013

Information asymmetries are prominent in theory but difficult to estimate. This paper exploits discontinuities in loan eligibility to test for moral hazard and adverse selection in the payday loan market. Regression discontinuity and regression kink ap...

The Nature of Risk Preferences: Evidence from Insurance Choices

By Levon Barseghyan, Francesca Molinari, Ted O'Donoghue, and Joshua C. Teitelbaum

American Economic Review, October 2013

We use data on insurance deductible choices to estimate a structural model of risky choice that incorporates "standard" risk aversion (diminishing marginal utility for wealth) and probability distortions. We find that probability distortions—characte...

Consumer Spending and the Economic Stimulus Payments of 2008

By Jonathan A. Parker, Nicholas S. Souleles, David S. Johnson, and Robert McClelland

American Economic Review, October 2013

We measure the change in household spending caused by receipt of the economic stimulus payments of 2008, using questions added to the Consumer Expenditure Survey and variation from the randomized timing of disbursement. Households spent 12-30 percent (dep...

Correction: The Composition and Drawdown of Wealth in Retirement

By James Poterba, Steven Venti, and David Wise

Journal of Economic Perspectives, Fall 2013

The Dividend Clientele Hypothesis: Evidence from the 2003 Tax Act

By Laura Kawano

American Economic Journal: Economic Policy, February 2014

This paper provides evidence that dividend and capital gains tax rates importantly influence household portfolio choices. Using data from the Surveys of Consumer Finances around the 2003 dividend tax reductions, I estimate the relationship between taxe...

How Financial Incentives Induce Disability Insurance Recipients to Return to Work

By Andreas Ravndal Kostol and Magne Mogstad

American Economic Review, February 2014

Using a local randomized experiment that arises from a sharp discontinuity in Disability Insurance (DI) policy in Norway, we provide transparent and credible identification of how financial incentives induce DI recipients to return to work. We find that...

Risk and Precautionary Saving in Two-Person Households

By Patricia Apps, Yuri Andrienko, and Ray Rees

American Economic Review, March 2014

The existing literature on precautionary saving is based almost entirely on the assumption that the household acts as if it consisted of a single individual decision-taker. In reality saving decisions are typically taken by two-person households. This p...

The Economic Importance of Financial Literacy: Theory and Evidence

By Annamaria Lusardi and Olivia S. Mitchell

Journal of Economic Literature, March 2014

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research, which casts financial knowledge as a form of investment in human capital. Endogenizing financial k...

Retirement Security in an Aging Population

By James M. Poterba

American Economic Review, May 2014

Elderly individuals exhibit wide disparities in their sources of income. For those in the bottom half of the income distribution, Social Security is the most important source of support; program changes would directly affect their well-being. Income from ...

The Aggregate Impact of Household Saving and Borrowing Constraints: Designing a Field Experiment in Uganda

By Joseph P. Kaboski, Molly Lipscomb, and Virgiliu Midrigan

American Economic Review, May 2014

We develop a model of households with multiple needs (smoothing shocks, financing investment) and constraints (limited credit, self-control issues) in order to examine the nature of household's financing constraints in a developing country, and the impact...

Disparities in Wealth Accumulation and Loss from the Great Recession and Beyond

By Signe-Mary McKernan, Caroline Ratcliffe, Eugene Steuerle, and Sisi Zhang

American Economic Review, May 2014

Using over two decades of Survey of Consumer Finances data and a pseudo-panel technique, we measure the impact of the Great Recession on US family wealth relative to the counterfactual of what wealth would have been given wealth accumulation trajectories....

All for One? Family Size and Children's Educational Distribution under Credit Constraints

By Jeanne Lafortune and Soohyung Lee

American Economic Review, May 2014

This paper examines the possibility that a child's years of schooling could increase in the number of siblings, instead of being diminished by competition for parents' resources: if unable to finance the education of their younger children, parents may do...

Who Is (More) Rational?

By Syngjoo Choi, Shachar Kariv, Wieland Müller, and Dan Silverman

American Economic Review, June 2014

Revealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function the choices maximize. We conduct a large-scale experiment to test for consistency with utility maximization. Cons...

"Fisher Dynamics" in US Household Debt, 1929-2011

By J. W. Mason and Arjun Jayadev

American Economic Journal: Macroeconomics, July 2014

The evolution of debt-income ratios over time depends on income growth, inflation, and interest rates, independent of any changes in borrowing. We examine the effect of these "Fisher dynamics" on household debt-income ratios in the United States over the ...

Wall Street and the Housing Bubble

By Ing-Haw Cheng, Sahil Raina, and Wei Xiong

American Economic Review, September 2014

We analyze whether mid-level managers in securitized finance were aware of a large-scale housing bubble and a looming crisis in 2004-2006 using their personal home transaction data. We find that the average person in our sample neither timed the market no...

Mortgage Modification and Strategic Behavior: Evidence from a Legal Settlement with Countrywide

By Christopher Mayer, Edward Morrison, Tomasz Piskorski, and Arpit Gupta

American Economic Review, September 2014

We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by settlement of U.S. state government lawsuits against Countrywide Financial Corpor...

The Distributive Impacts of Financial Development: Evidence from Mortgage Markets during US Bank Branch Deregulation

By Ishani Tewari

American Economic Journal: Applied Economics, October 2014

Well-functioning credit markets play a key role in boosting overall economic growth, but their impact on distributional outcomes is much less clear. I use a quasi-experimental setting provided by branch banking deregulation, an important episode of US ...

Fiscal Policy and MPC Heterogeneity

By Tullio Jappelli and Luigi Pistaferri

American Economic Journal: Macroeconomics, October 2014

We use responses to survey questions in the 2010 Italian Survey of Household Income and Wealth that ask consumers how much of an unexpected transitory income change they would consume. The marginal propensity to consume (MPC) is 48 percent on average. W...

Consumption and Debt Response to Unanticipated Income Shocks: Evidence from a Natural Experiment in Singapore

By Sumit Agarwal and Wenlan Qian

American Economic Review, December 2014

This paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock. Consumption rose significantly after the fiscal policy announcement: during the ten subsequent months, for...

Six Randomized Evaluations of Microcredit: Introduction and Further Steps

By Abhijit Banerjee, Dean Karlan, and Jonathan Zinman

American Economic Journal: Applied Economics, January 2015

Causal evidence on microcredit impacts informs theory, practice, and debates about its effectiveness as a development tool. The six randomized evaluations in this volume use a variety of sampling, data collection, experimental design, and econometric stra...