Bounds on Repayment Behavior: Evidence for the Consumer Credit Market
59 Pages Posted: 23 Nov 2007
Date Written: November 2007
How does the punishment for default affect repayment behavior? We use administrative data, provided by the leading Italian lender of unsecured credit to the household sector, to analyze households repayment behavior. Administrative data are particularly well suited to study what factors are responsible for default, but raise a fundamental econometric problem, since they identify the determinants of repayment behavior only for those who are granted credit. To overcome this problem, we provide upper and lower bounds on the determinants of repayment behavior. Moreover, we show how to use the restrictions from the theory to narrow the bounds.
Keywords: Manski Bounds, Consumer Credit, Default
JEL Classification: D14, K42, O17
Suggested Citation: Suggested Citation